The stock mutual fund is still mightier than the bank certificate of deposit or the money-market fund. That is, until a stock market correction occurs.
In the first half of 1993, the average stock fund gained 4.58 percent. While decidedly unexciting compared with some of the returns of the recent past, that's still a normal range by longer-term historical standards.
And, with the low yields on fixed-rate investments slipping, that return really doesn't look half bad.
There have been a few pockets of excitement. Gold-oriented funds rose a whopping 59 percent.
Japanese and Canadian funds each gained 28 percent, and natural-resources funds increased 22 percent.
But, in the current quirky market, expect leadership to change.
"In the past, we've seen groups such as health-care funds lead for as many as six or seven consecutive quarters, but I think that's unlikely for the gold funds," predicted A. Michael Lipper, president of Lipper Analytical Services, which tracks mutual fund performance.
"There tends to be seasonality with gold prices, and I wouldn't be surprised if gold funds, which are no longer cheap, didn't flatten out in the third quarter."
Of course, the real worry with the stock market at lofty levels and mutual fund investment booming is that a market downturn could have a devastating effect.
"Since we've been going up for 2 1/2 years, a market correction is probable, but it looks like it will be just a normal correction, not one of, say, 50 percent," Lipper said. "Remember that a 500-point fall from 3500 on the Dow would be 15 percent, but, back in 1987, when the Dow was around 2,000, it represented a more significant 25 percent."
In the event of a correction, holders of fixed-rate funds, rather than holders of stock funds, are the most likely to pull out, Lipper reasons. That's because many of them simply don't think it's possible to lose money in bonds, he said.
Gold-mining stocks have been the hot ticket.
"We invest solely in South African stocks, because right now that's where the best value is in gold shares," said Caesar Bryan, portfolio manager of Lexington Strategic Investments Fund, up 198.70 percent, to lead the pack for the first half of the year, as it did for the first quarter.
"I see gold working its way to more than $400 an ounce by September, due to strong Far East demand for gold jewelry and the rising inflation in many nations."
"Gold funds are very volatile, and our Gold Shares Fund was down 52 percent last year, but gold should always be a small portion of an individual's portfolio, perhaps 5 to 10 percent," said Victor Flores, portfolio manager of United Services Gold Shares Fund, up 91.60 percent in the first half of this year.
"Think of gold as portfolio insurance."
Top stock mutual funds through the first half of 1993, according to Lipper, were:
* Lexington Strategic Investments Fund, Saddle Brook, N.J.; $42 million in assets; 5.75 percent "load" (initial sales charge); $1,000 minimum; up 198.70 percent.
* United Services Gold Shares Fund, San Antonio; $310 million assets; no load; $1,000 minimum; up 91.60 percent.
* Van Eck International Investors, New York; $632 million assets; 5.75 percent load; $1,000 minimum; up 83.05 percent.
* Fidelity Select Precious Metals and Minerals Portfolio, Boston; $391 million assets; 3 percent load; $2,500 minimum; up 72.66 percent.
* Bull & Bear Gold Investors, New York; $49 million assets; no load; $1,000 minimum; up 71 percent.
* Blanchard Precious Metals Fund, New York; $45 million assets; no load; $3,000 minimum; up 70.06 percent.
* Excel Midas Gold Shares, San Diego; $7.7 million assets; 4.5 percent load; $100 minimum; up 69.79 percent.
* Thomson Precious Metals and Natural Resources Fund, Class A, Stamford, Conn.; $1.3 million assets; 5.5 percent load; $1,000 minimum; up 65.37 percent.
* Vanguard Specialized Gold and Precious Metals Portfolio, Valley Forge, Pa.; $467 million assets; no load; $3,000 minimum; up 65.19 percent.
* Keystone Precious Metals Holdings, Boston; $147 million assets; 4 percent "back-end" load; $1,000 minimum; up 65 percent.