TAKING STOCK OF FIDELITY'S FUNDS

By ANDREW E. SERWER

So what should you do with your money? While Fidelity still has plenty of chart toppers and more mutual-fund dollars than any of its competitors, there are today hundreds of other companies running 6,085 funds tailored to every investing whim imaginable. This staggering number of funds--which continues to grow almost daily--is both a blessing and a curse. Let no one ever say he can't find a fund that matches his investing goals. But on the other hand, how in the world do you ever decide which fund to buy?

In the mutual-fund business, biggest is very often best. Not only will well-established outfits like the Vanguard Group, American Funds and broker Merrill Lynch probably still be in business when you retire, but they also offer a plethora of funds and a wide range of services--from retirement planning to checking accounts. Says Dan Wiener, editor of Independent Advisor for Vanguard Investors, which tracks funds managed by the Vanguard Group: "There is a desire to be all things to all people. It's the supermarket approach."

Buying all your funds from a single, giant purveyor has its rewards. It makes coping with taxes and monthly statements easier, for example. But simplifying your life may not be the best strategy if you are looking for top performance. While these industry leaders offer many of the same types of funds, they are by no means cookie-cutter clones. Some are simply better at certain types of investing than others. Therefore, a better strategy might be to select the best funds--and don't go overboard here--from perhaps three different fund companies.

FIDELITY, Boston; 800-544-8888. The biggest in the business is famous for its brainpower, employing more than 300 analysts and portfolio managers to track thousands of stocks. (Fidelity has rightfully been known for its stock funds rather than its bond portfolios.) It would be a mistake not to consider buying some of Fidelity's funds. The company's stock-picking expertise is simply too great to ignore. Stars like Steve Wymer, who manages the $1.3 billion--smallish by Fidelity's standards--Dividend Growth Fund; Will Danoff, who runs the $19 billion Contrafund; and Robert Stansky, who recently took over Magellan, are all folks to invest by. It's still too early to rate Stansky's run at Magellan, but he was a standout at the Growth Company Fund. Fidelity's array of 35 sector funds, each of which invests in specific industries, makes sense for those with a hunch about, say, oil companies or food stocks. For instance, its Select Retailing Portfolio's yield in 1996 to date is 25%; Energy, 19%. The company's technical sophistication lets consumers get at their accounts by phone, personal computer and, soon, the Internet.

THE VANGUARD GROUP, Valley Forge, Pennsylvania; 800-433-5514. The long-standing No. 2 of the mutual-fund business and the leading practitioner of no-load investing, Vanguard is led by iconoclastic John Bogle. It is the Wal-Mart of mutual funds, dedicated to winning customers by driving costs lower and lower. Because of that strategy, Vanguard has grown like, well, Wal-Mart. The annual cost of keeping your money at Vanguard is 31' per $100 invested, vs. an average $1.11 for the industry overall. When it comes to money-market and bond funds, where every penny counts, Vanguard is a great choice. It also specializes in inexpensive index funds--which is like buying a whole market. Vanguard's Index Trust 500 Portfolio, which mirrors the S&P 500, beats up on most other mutual funds year after year. The rap on Vanguard is that when it comes to picking aggressive equity funds, its crew lags behind Fidelity's. But there are major exceptions, such as Vanguard's top-performing Specialty Health Care Fund.

AMERICAN FUNDS, Los Angeles; 800-421-0180. This is the quiet power of the fund business. The Los Angeles-based company--managed by parent company Capital Research & Management, the nation's third largest fund group--neither attracts attention nor seeks it. Cap Re is one of those rare enterprises that succeed through groupthink. All its funds are managed by half a dozen or so managers along with dozens of research analysts. The results are notable in overseas investing, as with its EuroPacific Fund. Downside: its stock funds carry 5.75% loads and its bond funds, 4.75%.

T. ROWE PRICE, Baltimore; 800-638-5660. This company resembles its hometown Baltimore Orioles: it always seems to field a good team. T. Rowe features a well-balanced lineup of all no-load bond, international and small-stock funds. Unfortunately T. Rowe recently lost some of its luster in the small-stock arena after it closed Small Cap Value and longtime stalwart New Horizons this year. Why? Too much money was flowing in, making the funds cumbersome to manage. Its OTC Fund, however, which also invests in small stocks, is still open for business.

PUTNAM INVESTMENTS, Boston; 800-225-1581. The recent performance of this venerable company, which runs more than 90 funds, is anything but staid. Putnam owes its success in part to its rigorous research and its collaboration between analysts and groups of managers. Its equity funds, such as the high-flying New Opportunities Fund, are among the best performing funds overall in the business.

MERRILL LYNCH, New York; 800-637-3863. Yes, the big bull sells mutual funds as well as stocks--118 proprietary funds, including closed-end and offshore. Of course, the old caveat applies: you buy from a broker, you pay a broker a commission--or, since it's a fund, a load.

CHARLES SCHWAB, San Francisco; 800-435-4000. While Schwab offers 26 of its own stock, bond and money-market funds, it also sells hundreds and hundreds of other companies' mutual funds through its ONESource Service, which offers no-load funds with no transaction fees. Schwab's Mutual Fund Marketplace sells load and no-load funds with transaction fees. Look for Schwab to become an increasingly potent force in the mutual-fund business.

There are many other brand-name funds, including Franklin Templeton, Dreyfus and broker Smith Barney. Always check out a fund's long-term record before you buy. Ask friends about their experiences with specific funds. Pay closer attention to those who have stuck with a fund for at least a few years. The biggest mistakes people make in mutual-fund investing? "Focusing on the short term rather than the long term is one," says Vanguard's Bogle, "and not giving adequate thought to an overall balanced investment program as distinct from randomly picking funds is another."

An often overlooked rule: a fund is usually only as good or bad as the manager at the helm. Keep a close eye out to make sure the guardian of your precious assets doesn't jump ship. If he or she does leave, watch carefully; and if the numbers start to slide, sell.

--With reporting by Stacy Perman and Jane Van Tassel/New York

With reporting by STACY PERMAN AND JANE VAN TASSEL/ NEW YORK