Q. On January 1st 2000 I invested $140,000 in AIM Basic Value and AIM Blue Chip mutual funds. Today those funds have a value of $83,000. At the same time I invested $15,200 in the Putnam Voyager fund, now valued at $9,200. This is a total loss in value of about $48,000 over 4 years and 6 months.

Assuming that I'm investing for the "long term"--- say 14 to 15 years--- what should I do? Stay put? Move to a balanced fund in an effort to gain some income to reinvest--- and hoping to recoup some of the $48,000? I'm concerned that another 5 years might only get me to break even and I will have been in these funds for 10 years with no return on my investment.

---J.P., by e-mail from Dallas

  

A. The names of the funds may change but that's question number one on most people's minds these days. The first thing you need to do is clear your mind of bad measures. You may know that you've lost $48,000 but the funds don't know. Neither do the stocks held by the funds. Neither the funds nor the stocks will perform better, or worse, because you'd like to recoup your $48,000.

The issue is whether these are funds you'd like to "ride" in the race that starts today, given that there are nearly 17,000 alternatives. You can answer that question by forgetting about your losses and checking the performance of these funds relative to other funds in the same category. A good place to start is www.Morningstar.com. Click on "funds" and check the record of each fund.

AIM Blue Chip needs to be replaced. It hasn't performed in the top 50 percent of competing domestic large growth funds in the last 12 months, 3 years, or 5 years. With a total expense ratio of 1.47 on the "A" shares (More on the "B" shares) this is a real all hat/no cattle fund.

Putnam Voyager is a similar story. The percentiles aren't as bad but you'd have a hard time convincing shareholders after four years of major losses.

AIM Basic Value, however, has done fairly well against other domestic large cap value funds. Indeed, it has never been below the top 50 percent and it has been well into the top quartile in the last year and 5 years. You should keep it as your value stock fund.

Two top performing no-load domestic large cap growth funds that would be good managed candidates to replace AIM Blue Chip and Putnam Voyager are Chesapeake Core Growth (ticker: CHCGX) and Brandywine Blue (ticker: BLUEX). You could also exit the manager guessing sweepstakes and invest in Vanguard Total Stock Market (ticker: VTSMX), knowing that low costs and tax efficiency will probably beat management guessing long term.

  

  Q.   If home values rose as interest rates fell, leading to excessive evaluations in many locations and followed by borrowing against the increased values, is there reason to expect that housing prices will reverse themselves as interest rates rise? Has that been the pattern in past years? If so, how much of a value swing is typical?

---T.M., by e-mail from San Antonio, TX

  

A. Regional differences are so large that there is no "typical." In addition, home prices aren't a function of a single factor. Here are three major factors:

•  Mortgage rates.   As interest rates decline, the monthly payment on the same house value declines and more buyers become eligible for financing. When rates rise the reverse happens: fewer buyers are eligible for financing. Interest rates have a major impact on the number of buyers.

•  Job Growth.   Declining interest rates don't help much in areas with declining employment. That's why there have been periods of static prices in both northern and southern California. Prices seldom decline much because we need shelter. Most people won't realize a loss on a home sale unless they are absolutely desperate.

•  New Home Construction. Cities with areas for growth may be able to build enough new housing to absorb population growth. That explains why home values in Dallas, San Antonio, and Houston haven't flourished. In Austin, on the other hand, job growth simply overwhelmed home building for a period. In some areas, e.g. Boston, San Francisco, Los Angeles, and San Diego, it is so difficult to add to the stock of housing that prices rise disproportionately with any job growth.

Home values were also given a major positive jolt by the bear market in stocks: many people felt houses were the only "safe" place for their money. As a consequence, they felt free to pay more and borrow more. Lenders, without business loan demand, have been eager to supply the funds.