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MONEY SMALL INVESTOR INDEX: SMALL INVESTORS SEEK HIGH YIELDS OVERSEAS

MONEY SMALL INVESTOR INDEX: SMALL INVESTORS SEEK HIGH YIELDS OVERSEAS
 /ADVANCE/ NEW YORK, Dec. 22 /PRNewswire/ -- Since Jan. 1, as the Federal Reserve has repeatedly slashed U.S. interest rates -- capped by last week's one-point cut in the benchmark discount rate to 3.5 percent -- small investors have poured more than $10 billion into high-yielding foreign bond mutual funds, according to data gathered for MONEY magazine's Small Investor Index. The torrent of new cash has made the foreign portfolios the year's most popular category of taxable bond funds.
 While U.S. yields have been falling -- to about 8 percent for domestic short-term bond funds -- the foreign funds have been paying as much as 9.5 percent. The chief reason: at the same time as the Fed has been pushing down the U.S. discount rate, the German central bank has been hiking its discount rate -- to 8 percent -- to curb inflation, thereby pushing up rates on all European bonds.
 Lured by the high yields, U.S. investors have flocked to such funds as Scudder Short-Term Global Income, yielding 9.4 percent, which took in $58 million of fresh cash in November and another $50 million in the first half of December.
 Investment experts caution individuals to be mindful of currency risks with foreign bond funds. When the dollar drops in value against other major currencies, as it has since June, the funds' shares appreciate; but when the buck rises again, their prices will fall.
 Jon Woronoff, editor of the International Fund Monitor newsletter in Washington, D.C., says that "small investors shouldn't put more than a third of their fixed-income portfolios into foreign funds." He recommends that individuals invest the rest in low-risk funds that hold short-term U.S. bonds, which pay about 8 percent.
 Last week, the MONEY Index rose $73 to $46,798. Stocks gained $21, bonds added $42, and certificates of deposit and money-market funds contributed $17.
 This Last Year % Change from a
 Week Week Ago Week Ago Year Ago
 113.54 113.36 100.08 +0.16% +13.45%
 Latest Changes for Each Asset
 % Change from a
 Category Index Week Ago Year Ago
 Stocks:
 NYSE 120.27 +0.27% +19.71%
 ASE/OTC 144.06 -0.28 +43.58
 Equity funds 121.96 +0.18 +21.51
 Bonds:
 Taxable Bonds 113.35 +0.38 +13.38
 Municipals 111.86 +0.41 +11.78
 Bond funds 115.24 +0.19 +15.06
 Short-term assets:
 CDs 106.06 +0.09 +6.20
 Cash 105.05 +0.08 +5.16
 Other:
 Real estate 100.97 +0.12 +0.99
 Gold 95.29 -2.93 -4.89
 Dec. 28, 1990 equals 100
 Where Average Small Investors Have Their Money Now
 Current Year Ago Current Year Ago
 NYSE 20.03% 19.09% Bond funds 4.99% 4.19%
 ASE/OTC 6.32 6.03 CDs 19.17 21.97
 Equity funds 4.64 3.59 Cash 22.73 21.88
 Taxable bonds 16.46 17.19 Real estate 0.78 0.78
 Municipals 4.33 4.71 Gold 0.55 0.59
 Sources: Bank Rate Monitor, IBC/Donoghue's Money Fund Report, the Federal Reserve, Investment Company Institute, Lehman Bros., Lipper Analytical Services, Merrill Lynch, Morgan Stanley Capital International, National Associationof Real Estate Investment Trusts, Prudential Asset Management, Standard & Poor's, Robert Stanger & Co., World Gold Council.
 -0- 12/23/91
 /NOTE TO EDITORS: This material is also available in printable form from AP GraphicsNet and Access services for graphics and tables (under the file name MoneyIndex) and from PR Newswire for full text./
 /CONTACT: Jordan Goodman of MONEY, 212-522-3618, or Patti Strauss of MONEY Public Relations, 212-522-2695/ CO: ST: IN: SU: ECO


GK -- NY058 -- 4428 12/20/91 14:28 EST
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Date:Dec 20, 1991
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