Been there, paid for that ...

Monday, June 26th 2000, 12:00 am

By: News On 6

Mutual funds have given common folks the ability to own a basket of stocks managed by professional money managers. But somewhere along the way, the fund industry digressed from its original purpose, says John C. Bogle, the dean of index funds and founder of Vanguard Group, the mutual fund giant.

"While mutual funds may be the best game in town, they aren't playing nearly as good a game as they should," Mr. Bogle wrote in a recent commentary in The Wall Street Journal.

According to Mr. Bogle, the returns of investors in stock, bond and money market funds have fallen "far short of what is available in those segments."

"A diminishing focus on stewardship, shrinking investment horizons and soaring costs are responsible," he groused. "The mutual fund industry has lost its way."

Funds come and go at a remarkable rate, and the high turnover of portfolio managers also aggravates the situation, Mr. Bogle wrote. What's more, fund managers aren't holding on to their investments as long.

"Fund managers, once long-term investors, have become short-term players â€“ speculators, if you believe that holding stocks for an average of 406 days has little to do with investing," Mr. Bogle wrote. "All of these measures of mutual fund investment activity â€“ funds that come and go, portfolio holdings that come and go, portfolio managers who come and go â€“ frustrate the achievement of long-term investing objectives."

Your image of a millionaire may be of someone who has several people at his or her beck and call to do shopping, investing and other tasks for them.

That's not necessarily so, according to Forrester Research in Cambridge, Mass., an Internet research firm.

"Our research uncovered four oft-cited misconceptions about affluent consumers: That they don't like technology, don't go online, don't shop online and don't use the Net to manage their finances," said Ekaterina O. Walsh, a Forrester analyst.

"While millionaires are thought to demand too much service to manage their own online portfolios, in reality, they are 79 percent more likely to trade stocks online, 75 percent more likely to trade mutual funds online and 47 percent more likely to track their portfolios online," Forrester said.

In addition, 31 percent of the millionaires the company surveyed use discount brokerages, compared with 17 percent of "non-affluent wired investors," and they keep more than a third of their portfolios there.

The affluent also regularly research products online before buying either in a store or via the Internet, Forrester said.Parents wanting tips on how to save for their children's college education should talk to peers who've learned the hard way.

Parents of college-bound kids passed on some tips in a recent survey by Fidelity Investments, the mutual fund company:

Start saving even before your child is born. On average, parents of today's high schoolers started saving after their child's sixth birthday, but two-thirds of parents surveyed said they wish they had started earlier.

Save regularly. Parents of high schoolers said contributing weekly, monthly or annually would have made it easier for them to save. One way to do that is to have money automatically deducted from your bank account and deposited into your child's college fund.

Earmark savings specifically for college. Nearly half of parents of older children said establishing and making deposits into an account specifically set aside for college would have helped them save more. Doing this prevents you from mingling college money with funds for other purposes. It's also a psychological plus because you have concrete evidence that you're serious about financing your child's education.

Cut back on living expenses. Every one of us can find ways to spend less money. While half of high schoolers' parents surveyed said that living expenses represent one of the largest obstacles they face in saving for college, almost the same number said they realistically could have cut back to find extra money for college savings.

Ask family for help if you have to. While this isn't the most popular strategy among parents, parents of younger children are more than twice as likely as parents of high schoolers to turn to relatives to help them save.

Pamela Yip covers personal finance for The Dallas Morning News. Is there a personal finance subject you would like to read more about? E-mail her at pyip@dallasnews.com.