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MONEY SMALL INVESTOR INDEX: SMALL INVESTORS CHASE RISKY JUNK BONDS

 MONEY SMALL INVESTOR INDEX: SMALL INVESTORS CHASE RISKY JUNK BONDS
 /ADVANCE/NEW YORK, Dec. 8 /PRNewswire/ -- With yields on money funds and CDs now below 5 percent, small investors are rushing into risky junk bond mutual funds that yield 10 percent or more, according to data gathered for MONEY magazine's Small Investor Index.
 So far this year, the strategy has worked, with the average junk bond fund registering a 34 percent total return. Even though the recession sent the junk bond default rate soaring to 6.5 percent, vs. only 2 percent three years ago, junk bond prices advanced strongly because investors anticipated an economic recovery.
 As a result, junk funds have been taking in millions of dollars of fresh cash each day. For example, the Financial Bond Shares: High Yield Fund in Denver, which yields 10.5 percent and started 1991 with $40 million in assets, has attracted a net $70 million through November.
 Many analysts warn, however, that the junk market is now overheated. More than $2 billion of new junk bonds were issued in November, and an additional $3 billion of bonds are scheduled to be offered by year-end. If the supply exceeds investor demand, prices would drop.
 The analysts say that savers should not switch large amounts of money from low-yielding CDs to junk bonds. "People should not shift their investment philosophy radically from being conservative to taking big risks," says David Nicholas, director of fixed income research at Strategic Portfolio Management in Atlanta. He recommends that even aggressive investors put no more than 5 percent of their money into junk bonds these days.
 Last week, the Index, which tracks the typical individual's holdings, rose $251 to $46,540. Stocks gained $107, bonds added $128, and CDs and money-market funds contributed $18.
 This Last Year % change from a
 week week ago Week ago Year ago
 112.91 112.30 99.76 +0.31% +13.18%
 Latest Changes for Each Asset
 % change from a
 Category Index Week ago Year ago
 Stocks
 NYSE 118.57 +0.31% +18.49%
 ASE/OTC 143.92 +2.15 +43.43
 Equity funds 121.36 +0.72 +21.21
 Bonds
 Taxable Bonds 112.38 +1.16 +13.34
 Municipals 111.15 +0.95 +10.34
 Bond funds 114.69 +0.90 +14.30
 Short-term assets
 CDs 105.86 +0.10 +6.30
 Cash 104.87 +0.09 +5.22
 Other
 Real estate 100.94 -0.17 +0.89
 Gold 100.45 -0.47 +3.42
 Dec. 28, 1990 equals 100
 Where Average Small Investors Have Their Money Now
 Current Year ago Current Year ago
 NYSE 20.07% 19.07% Bond funds 5.01% 4.18%
 ASE/OTC 6.34 6.02 CDs 19.30 21.95
 Equity funds 4.65 3.59 Cash 22.45 21.95
 Taxable bonds 16.50 17.18 Real estate 0.78 0.78
 Municipals 4.34 4.70 Gold 0.57 0.57
 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 Association of Real Estate Investment Trusts, Prudential Asset Management, Standard & Poor's, Robert Stanger & Co., World Gold Council.
 -0- 12/9/91
 /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 Straus of Money Public Relations, 212-522-2695/


CK -- NY051 -- 0170 12/06/91 14:34 EST
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Date:Dec 6, 1991
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