Your Fund Soared on the Fed Move -- Great, It's Time to Start Worrying

The good news is that your growth or tech fund shot up 20% yesterday. Unfortunately, that's also the bad news.

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If you've been under a rock, yesterday the Federal Open Market Committee unexpectedly cut its key fed funds rate from 6.5% to 6%. That's usually good for stocks because falling or easing rates frees up more money to go into the stock market, and the market essentially went bananas. The Dow Jones Industrial Average finished the day up 300 points, or 2.8%, and the tech-laden and battered Nasdaq Composite rocketed up 325 points, or 14.2% -- its biggest one-day percentage gain ever.

Consequently, a slew of tech funds and tech-heavy growth funds rang up a stock-like 20% gain -- yes, we've tracked some down for you. Don't get me wrong, a fat one-day gain is great, but as my colleague Jim Cramer noted this morning, that should also raise a red flag.

Here's why: Funds that experience giant upswings usually do so because they're making big bets on particularly high-priced stocks. And that's also a recipe for big downswings -- need we consider the merciless beating most of 1999's Century Club absorbed in 2000?

The upshot is that a titanic run-up for a fund is often a good reason to scale back your exposure. So, you might want to look over those go-go growth funds you've been ignoring in your sagging 401(k) account and ask yourself if now might be a good time to reduce your tech exposure and look at that plain-vanilla value or index fund -- check out this recent column for the details on a healthy tech diet.

Not that yesterday's bump doesn't tell you something about your value funds, too. If they rocketed up yesterday, they might be taking bigger risks than you expected. The large-cap value (NBSSX)Neuberger Berman Focus Trust fund, for instance, gained 11% yesterday, perhaps due to its above-average 28% tech weighting. (If you're curious, legendary value investor Bill Miller's (LMVTX)Legg Mason Value Trust fund posted a 4.7% gain, indicating he's not going too far out on the limb of the value tree.)

OK, end of lecture. Let's look at some of yesterday's biggest gainers to give you a sense of how big high-octane funds' gains and risks can be. We're going to look at the five tech funds, five big-cap growth funds and five mid-cap growth funds that jumped highest on Wednesday -- starting with tech funds.

Tech Funds That Took Off
Fund Name	One-Day Return	Fourth-Quarter 2000 Return	Average Price-to-Earnings Ratio
(BTECX)Berkshire Technology	24.8%	-46.1%	55.4
(PBTCX)PBHG Technology & Communications	24.3	-51.0	51.6
(ROGSX)Red Oak Technology Select	23.7	-44.7	50.8
(BTBAX)Amerindo Internet B2B A	23.3	-45.1	58.9
(RYIAX)Rydex Internet Adv	23.3	-53.2	57.7
Source: Morningstar

Obviously, these funds rang up eye-popping gains yesterday, but their steep losses in last year's fourth quarter show they can swing down just as hard. Most of these funds made our list because they bet big on a relatively short list of favorite stocks. On average the five funds held about 30 stocks, as of their most recent portfolio report. The average tech fund holds 70 stocks, according to Morningstar.

The (BTBAX)Amerindo Internet B2B fund, for instance, held just 12 stocks as of the end of November. At that point, 15.1% of the fund's money was invested in online auction shop eBay(EBAY) and 10.7% of the fund was riding on Juniper Networks(JNPR). The two stocks gained 30.4% and 28.7%, respectively, yesterday.

And these funds' favorite stocks tend to be more expensive than even their peers' picks. The stocks in this handful of funds' portfolios average price-to-earnings ratio is around 55, compared with 44 for its average peer.

The five hottest big-cap growth funds this year have serious tech leanings, too. Translation: They're tech funds.

Biggest Big-Cap Growth Gainers
Fund Name	Jan. 3 Gain	Fourth-Quarter 2000 Return	Average Price-to-Earnings Ratio
(RYVYX)Rydex Dynamic Velocity 100	38.3%	-62.8%	N/A
(UOPIX)ProFunds UltraOTC Inv	37.7	-62.4	43.9
(BFOCX)Berkshire Focus	24.4	-46.0	54.6
(MGFQX)Millennium Growth	23.5	-41.9	59.5
(POTCX)Potomac OTC Plus Inv	22.7	-41.6	41.2
Source: Morningstar

Each of these funds has more than 70% of its money in tech stocks, as of its most recent portfolio. Three -- (RYVYX)Rydex Dynamic Velocity 100, (UOPIX)ProFunds UltraOTC and (POTCX)Potomac OTC Plus -- are souped-up index funds. Each tracks a techie benchmark and uses options to seek more than 100% of its return.

The (BFOCX)Berkshire Focus fund looks like it owns roughly the same stocks as (BTECX)Berkshire Technology, which topped the top tech-fund gainers yesterday. Both funds are run by Malcolm Forbes III, and their returns differ by 0.1 of a percentage point.

The (MGFQX)Millennium Growth fund had a 96.9% tech stake at the end of September.

The tech theme is strong among the mid-cap growth funds, too.

Mid-Cap Growth Rockets
Fund Name	One-Day Return	Fourth-Quarter 2000 Return	Average Price-to-Earnings Ratio
(POGSX)Pin Oak Aggressive Stock	19.9%	-40.9%	47.9
(IPSFX)IPS New Frontier	18.7	-47.8	47.7
(SANIX)Summit Apex Nasdaq 100 Index	18.4	-34.4	44.3
(DOIGX)Dominion Insight Growth	18.0	-43.3	37.7
(PBHEX)PBHG Select Equity	17.8	-43.2	54.5
Source: Morningstar

These funds also have the lion's share of their assets invested in tech stocks. The (POGSX)Pin Oak Aggressive Growth Stock fund, run by James Oelschlager and Donna Barton, had more than 90% of its money in tech stocks at the end of September, according to Morningstar. The (IPSFX)IPS New Frontier fund, run by Robert Loest, and the (PBHEX)PBHG Select Equity fund, run by Michael Sutton since April, take a similar tack.

What tech stocks are all these folks holding? Well, if we combined the portfolios of these funds, there are three stocks that come up the most: JDS Uniphase(JDSU), Cisco Systems(CSCO) and Juniper Networks.

Those three stocks sport price-to-earnings ratios of 103, 70 and 447, compared with 23.8 for the S&P 500. If these funds are 5% or 10% of your portfolio, that's fine, but they probably shouldn't be more than that. As Cramer said earlier today, the folks who make the most money in the market over time aren't the ones riding tigers.

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