Q. I have trouble deciding when to dump a mutual fund. I know that there are some guidelines for this--- comparing like funds, for example--- but over the years I have seen funds bounce back nicely after a year or two of weak performance. This has led me to hold on to two funds, which have lost a lot of value: T. Rowe Price's Science and Technology and Janus Global Life Science.

They have tanked so much I do not want to sell low. But am I fooling myself by holding on to them?

---R.S., Minneapolis, MN

  

A. Neither fund is very impressive when measured against its competitive peers. Janus Global Life Science, for instance, has been beaten by at least 60 percent of its competition over the last 12 months and 3 years according to Morningstar data.

T. Rowe Price Science and Technology has been outperformed by its competitive peers even longer. It has trailed 70 percent of its peers for 15 years. The only redeeming virtue I can see is that it has a new manager and performance has been better in the last 12 months.

In both cases, however, you are taking a lot of risk and getting zilch in extra return. These funds may, repeat MAY, bounce back but their bounce may be smaller than the bounce likely to be enjoyed by similar funds with better managers.

  

Q. I am looking for a formula or spreadsheet that determines a crossover point for tax benefit on home ownership.   After re-reading your article "What Are Those Tax Deductions Really Worth" coupled with the rise of insurance, taxes and the fall of mortgage interest rates, I want to take a closer look at this from a quantitative point of view.   This would ignore the qualitative factors of homeownership.

Since the standard deduction is rising and mortgage interest paid is falling, more federal taxes are paid by some.   I'm sure this has been an ugly April 15th issue for some people.

---J. J., by e-mail    A.   For 2002 the standard deduction for a joint return is $7,850, $4,700 for a single return, and $6,900 for a head of household return.   The only deductions that "count" to reduce your federal income tax bill are the ones that bring your total deductions over the standard deduction. Unless you have a medical disaster you won't have any medical deductions. As a result, most taxpayers only have mortgage interest, real estate taxes, and charitable donations as deductions. People in states with state income taxes also have the state income tax as a deduction.

Today, a $100,000 mortgage can have an interest rate as low as 4.5 percent. This means a maximum cost of $4,500 a year. As a consequence, you could be living in a $200,000 house with a real estate tax bill of $4,000 a year and your total housing related deductions would be only $8,500.

This is only $650 over the $7,850 standard deduction for a joint return so your tax benefit from home ownership is only $650 times your tax bracket.     Not a big deal.

Every time I write about this some readers tell me that I'm mean and crazy. But I think there are many, many people out there who have owned their houses for a while.   They have small mortgages. They don't have much in deductions from their primary home. Unless they are big charitable givers or live in a high tax state (or both), real estate deductions probably don't do much for them.

Remember, the median home value in America is about $160,000. That means half of all homeowners have a house worth less than $160,000. The house may be financed for much less than that because they've owned it for 10, 15, or 20 years.

The people who really love the home mortgage interest deduction are the people who live in the high cost cities who have large mortgages. This tax deduction for the high cost areas of the United States costs the U.S. Treasury (read: the rest of us) some $56 billion a year.   Sometimes I wonder why people in places like El Paso, Des Moines, and Fargo need to subsidize people with $250,000 mortgages on one-bedroom condos in Boston and San Francisco.