Q: I have an acquaintance who works at a brokerage, and we have been discussing mutual-fund investing. He argues that load mutual funds are a better investment than no-load funds. He says that during a market correction, "speculators" jump out of no-load mutual funds. A load fund, on the other hand, will have plenty of cash, because nobody bails when they have paid a significant commission in the first place. This allows load-fund managers to buy stocks at discount prices. What do you think?

A: When investing in funds, the costs that you pay are a significant determinant of your long-term performance. Up-front commissions are particularly painful to pay, because that money is gone and deducted from your original investment and thus not available for long-term compounding.

I don't agree with the notion that no-load fund investors speculate and are stupid enough to bail out after a major correction. Mutual-fund data, which I review, does not confirm this. Overall, fund investors do tend to sell more during a correction and buy more after prices are already well on the way back up. However, this phenomenon happens with both no-load and load funds.

Another flaw in your acquaintance's argument is that load funds aren't sitting around with lots of cash waiting to take advantage of cheap stock prices after a correction. Few fund managers have been successful with market timing, and I haven't seen any evidence that load managers are successful market timers.

Q:I am approaching retirement in two years. My portfolio is divided among stocks, mutual funds and short-term T-Bills. The annual income generated from these is approximately $40,000. Some of my stocks are good growth stocks paying no dividends. Should I wait until retirement and then go for good dividend-paying stocks for income, as I will need more than the $40,000 to live on yearly?

A:First, you should consider all of your sources of retirement income. What about Social Security? Do you have any pension money from corporate work you've done?

Structuring a retirement portfolio totally toward generating a certain level of annual investment income can be a dangerous thing to do. Since bonds pay higher rates of interest than stocks, you might end up with too much of your entire portfolio in bonds.

Your idea of investing in stocks with higher dividends is a reasonable one.

You should crunch some numbers to see what annual standard of living your nest egg should be able to provide during the course of your retirement. Also, determine an overall asset allocation that makes sense for your situation. Subtract your age from 110 and consider investing that portion in stocks, with the remainder in bonds.

Address correspondence to Eric Tyson, King Features Syndicate, 888 Seventh Ave., New York, N.Y. 10019

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