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These funds are no gold mine

Q: Out of fear of a rocky stock market, I have invested in mutual funds that have portfolios made up of gold mining companies. They have been going downhill. Should I buy more, hold or sell?

A: You're right about gold-mining stocks going downhill. Over the past decade, in which stocks have gained 10 percent to 15 percent a year, gold investments have either increased modestly or have declined in value.

People generally invest in a gold fund when they fear inflation, but trying to predict the course of inflation is next to impossible. For that reason, investment in gold _ or other precious metals _ is a sucker's bet. So far this year, inflation has been tamed and shows no signs of crawling out of its cage. If, next year or the year after, inflation becomes a problem, then gold-mining stocks should do well. If inflation continues to be relatively tame, then your gold funds won't produce much of a profit.

Q: I need to know if an individual can purchase U.S. Treasury bills from a Federal Reserve Bank. If so, what's the minimum purchase and what are current rates?

A: Yes, indeed, you can buy Treasury bills from a Federal Reserve Bank. Your own bank can tell you where the nearest Fed bank is. Through the Federal Reserve's Treasury Direct program, you can buy Treasury securities _ bills, notes and bonds _ without paying sales commission.

Write to the Fed bank in your area and request a tender form application. Fill it out and include a cashier's or certified check for at least the minimum purchase, which is $10,000 for T-bills. If you want to invest more, you can do so in $1,000 increments.

Three-month and six-month T-bills are auctioned every Monday. Fifty-two-week bills are sold every four weeks.

As a small investor, you should submit a non-competitive tender, which would give you a rate based on the average bid by large investors.

As of this writing, the average yields were: 5.05 percent (three-month T-bill), 5.57 (six-month bill) and 6.06 (one-year bill).

Q: I have an individual retirement account with a mutual fund, and I want to transfer it to another company that offers another fund that's more to my liking. I understand that I have to cash out with my current fund, fill out an IRA form for the new fund and send in my money. Is there an easier way of doing this?

A: Yes. You should be able to arrange a trustee-to- trustee transfer. With that arrangement, you get a form to fill out from the new fund company, which handles the details for you.

You could cash out your shares from your current fund, receive a check and send it to the new company. If you make the switch within 60 days, you would not be exposed to tax liability. However, you would have to report that transaction on your federal tax return. A trustee-to-trustee transfer does not have to be reported to the Internal Revenue Service.

In the future, you might consider doing business with a mutual fund company that has a "family" of funds, with a wide variety of investment choices. With most such companies, all it takes is a phone call to switch your money from one fund to another in the same family.

William Doyle welcomes written questions but will be able to give answers only through the column. Address questions to William Doyle, King Features Syndicate, 235 E 45th St., New York, NY 10017.

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