3 Q & A'S

Q: Now that the New York Stock Exchange is quoting stock prices in pennies rather than fractions, and the NASDAQ is set to follow in April, what do the changes mean to individual mutual fund shareholders? - Alice.

A: Perhaps more than what you might think

. Decimal pricing is a way of listing the price of something in dollars and cents, rather than fractions like 1/16, 3/32 or 5/64. So if you're trading stocks, instead of having to remember that a 16th equals 6.25 cents, all you need to know now is that stock prices now move in increments of one penny.

According to the pros, one of the primary reasons the markets have moved from fractions to decimals is so our stock markets can remain competitive globally.But when it comes to mutual fund investing, those trading the stocks for your funds now have some new pricings to deal with.

"Now we simply have 84 new price points to trade stock on," says John Wheeler, head of equity trading for American Century Funds. " We were trading in 16ths, and now we're trading in pennies, in decimals. So, all we've really done is expanded the number of price points in between dollars."

Wheeler explains that from the trading side, the spread ( the difference between the bid and the ask price) is now narrower. So, instead of the per share price on a stock moving in increments of about six cents, they now move in increments of one cent. What this means is, the closer the difference between buyers and sellers prices, the less "slippage" there is in a transaction. And that can translate into good news for individual fund investors.

"The slippage costs that mutual funds incur in buying and selling their stock is a direct expense to the shareholder and hurts their (fund's) performance, " says Wheeler." So, to the extent that you can lower the slippage costs, decimals have the potential to increase a mutual fund's performance because of the lower transaction costs that the fund has incurred."

The new decimal pricing, however, doesn't have any impact on a fund's net asset value, (NAV)."It's not going to impact the NAVs that investors see displayed in the paper," says Wheeler. "That's because mutual fund NAVs have been priced in decimals for years."

Q: I've left my job and will be rolling my 401 (k) into another. If I take $5000 out of it, and do so before I turn 59 1/2, how much will I have to pay in taxes? Also, what tax forms will I need to fill out? - MK

A: Can't help you with the dollar amount of tax that you'll pay--- that's based upon your tax bracket. But can tell you that taking money out of a retirement account is costly.

According to Boni Callaway, the manager of investor education at INVESCO, taking money out of a qualified retirement account before age 59 1/2 is expensive money to touch because it comes with a 10 percent penalty. Then, gets taxed as ordinary income to boot."Even if you are in the lowest tax bracket, 15 percent, it's costing you 25 percent," says Callaway. "And, take that money directly out of your 401 (k), and your employer is going to withhold 20 percent of it."

If you really need the money, she suggests rolling the 401 (k) monies into an IRA Rollover, then take the $5000 out of it. While you'll still have taxes and a penalty to pay, you won't have to face that mandated 20 percent withdrawal fee from your employer.

As for the tax forms, you'll need IRS Form 1099-R. It's the Retirement Plan Distributions form and is for shareholders who have taken IRA or other retirement plan distributions.

Speaking of taxes, INVESCO's annual tax guide for the year 2000 is bigger and better than ever. Titled, "Your INVESCO Funds Tax Guide", it's easy to read and understand, free, and can be yours by calling 1-800-525-8085.

Q: I'm new at fund investing and don't know if I should work with an investment advisor or go it alone. Any suggestions? - Online from WB

A: Remember the old saying, "Time is Money?" Well, it's still true today.

For any brand new fund investor, figuring out how mutual funds work is one thing. Trying to pick one or two to invest in--- out of a sea of many thousands---is quite another. So, my suggestion is do both.

Start learning about funds by reading as many books and articles about them as possible. Then, find an investment professional to work with to get you started. After you've got some knowledge, investment experience and find you've got the time---and an interest in the subject---a year or two down the road you'll know which avenue is best for you.

For the record, results from a current survey about do-it-yourself investors conducted for the Forum for Investor Advice, a Maryland-base nonprofit organization dedicated to informing the public about the value of full-service financial advisors, showed that 12 percent of those interviewed said the main reason they don't use an advisor is because they see themselves as more knowledgeable than an advisor.