LIPPER SENIOR RESEARCH ANALYST DON CASSIDY ON KTLK AM-760

Thursday, Nov. 6

A. Good idea. November was the second good month in a row for stockfunds, but bond funds fell slightly as some optimism returned about apossible short recession and then maybe higher rates down the road. Equityfunds rose 7.2% on average--- a great one-month rise, but of course we wellknow that is not something one should count on repeating for long periods.The market can't sustainably go straight up at an 85 or 90% annual rate!

Q. Didn't our old friends, the Science & Technology funds, have a greatmonth in November?

A. Exactly. They were clearly the biggest gainers, with an average of+15.9%. That still leaves them down 38% for the YTD (11 months) and downover 28% PER YEAR for the last 2 years. Their average 5-year return isnow just +8.7%, above the overall equity average of +6.1% but not greatconsidering risk. If you go back 10 years, though, they are near the topwith a plus 18.7% per year.

Q. What else did well in November, Don?

A. Pacific Ex Japan (+13.4%) and China Region (+10.1%) funds both didwell. This seemed closely tied to revived confidence in technology stocks(worldwide) as of course those world areas are big in that sector.

Q. What about diversified domestic funds?

A. November was typical of a recurring pattern. When the market goes up,growth beats value; in down markets the leadership reverses. There wasonly a slight advantage in large-cap over the other sizes. The Large-capGrowth type gained 9.3% and Multi-cap Growth was best with a +9.7%.Small-Cap Value brought up the rear in a tight race, still up a nice 6.4%.

Q. Isn't that a switch from the overall 2001 pattern?

A. Sure is. In the diversified area, Large-cap Growth is down 23.3% andMulti-cap Growth down 27.6%, the worst. Small-cap Value is still best, up9.6% (the S&P 500 Index Objective funds is down 13.2%) and Mid-cap Value is#2, at +5.6%.

Q. So, the winners YTD are pretty sparse...

A. Definitely. All of the overseas types are down, and the only UP sectorfunds are Real Estate, with a 5.8% gain, and Gold Oriented, up 13%. Soright now that one stands as the year's winner. YTD, the average equityfund is still down 15.6%.

Q. Don, we get so focused a lot of the time on shorter-term results. Howabout some LONG-term perspective?

A. Glad you asked; a very valid point. Industry data show that theaverage investor's holding period is now about 2.5 years, down from 7 adecade ago. People are less patient and the bear market has scared theminto selling losers.

Leaders and Laggards for the 10 years ended November 30 (annualized)
Financial Services	+18.74%
Science & Technology	+18.70
Health/Biotechnology	+15.36
Multi-Cap Value	+13.61
Mid-Cap Core	+13.59
Small-Cap Value	+13.40
Mid-Cap Value	+13.25
for context:
S&P 500 funds	+13.63%
Average of all equity funds	+11.13 (which includes a lot of lagging overseas ones)
and on the bottom of the list....
Gold Oriented	-4.04%
Japanese	-4.02
Pacific Region	+1.80
Emerging Markets	+2.39
Latin American	+3.11

Q. What do you make of all this? What would be good for investors to do?

A. Well, you know of course we don't give specific advice on funds. Itwould be good to check our new website, called LipperLeaders.com, to seewhich funds have shown good preservation and the strongest consistency ofreturns. I think a lot of people got spooked out at the bottom because theyhad very volatile funds. Beyond that, diversification always deservesmention: you will sleep better if your money is well spread around. And ifthe costly experience of 2000 and 2001 has taught us anything, don't chaseafter the latest hot areas and don't sell out the latest cold ones. Steera more middle course and try not to look so often that you buy high andsell low.

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Don Cassidy is a Senior Research Analyst at Lipper specializing in fund flows, exchange-traded funds, (ETFs), closed-end funds, equity fund performance, and author of Trading on Volume (McGraw-HIll).