Buying a mutual fund puts you less on guard than buying a used car or a so-called $10 Rolex from a guy on the street who's set up a card table. In the grand scheme of things, the fund world is well-regulated, but there are still some fairly standard tricks of the trade every fund investor should keep in mind.

Over the past month or so, we've looked at

share splits -- pointless exercises sometimes used to pitch a fund as somehow "cheaper" -- and the practice of

quietly boosting one fund's broker payout, thus creating a potential conflict of interest where an adviser might be tempted to sell an inferior fund for its higher payout, rather than its suitability for a client's needs. Today we're looking at another questionable play in fund marketers' playbooks: Pitching a fund's subscription offering as if it were a hot stock IPO.

In a subscription launch, a fund company provides investors with a prospectus for a new fund and offers them the chance to essentially reserve launch day shares in the month or so before it launches, usually at $10 a pop. In a way it looks like the hot stock's IPO and it's often made to feel like a hot stock's IPO, but the comparison is at best inaccurate and at worst misleading.

Here's why: Unlike stock launches, a fund's share price doesn't charge up to levels it probably won't see again in its first few days. Like share splits, subscription offers essentially entice investors to think of a fund's share price as if it were a stock, which isn't right. A fund's

net asset value (NAV), or share price, is based on the underlying value of all the stocks in the fund's portfolio, so you're not missing a steep run-up right off the bat.

I've

talked about this issue before, but given the emails I've gotten asking about the

Janus 2

fund's IPO, it merits mentioning.

The Janus 2 fund, ostensibly a knock-off of the closed

(JANSX)

Janus fund, is currently in subscription prior to its year-end launch. Like everyone else who owns a Janus fund (

(JAFIX) - Get Report

Janus Flexible Income) in a

Charles Schwab

brokerage account, I've gotten an email from Dave Shaver, a senior vice president with the leading online brokerage's funds unit.

In the email and on Schwab's Web site we're told that "this special subscription offer" gives us the chance to "be among the first to invest." A postscript in the email reminds us of the subscription period's dates and urges us to "Place your order now!" To those readers wondering if this urgency is spin or substance, it's the former.

When

Westcore Funds

launched its

Westcore International Select

fund they sent out a flyer to advisers and journalists, touting the chance to buy the fund on its first day. "The opportunity to get into the Westcore International Select Fund will always be there. But the special opening price of $10 per share is only available on November 1, 2000." So what?

In fact, subscription offers probably have more advantages for fund companies than fund investors. A subscription offer helps a fund company avoid using its own cash to seed a fund; this way, the fund launches with a head start toward the magical $100 million mark -- the asset level where most stock funds break even.

What do fund investors get for being "first"? Shares of a fund with no track record. Folks that thought they were getting in on the ground floor of splashy 1999 subscription launches have discovered a subbasement. And here I'm talking about the likes of the

(HIPAX) - Get Report

H&Q IPO and Emerging Company fund (down 46% this year),

(PWKAX)

PaineWebber Strategy fund (down 25.3% this year) and the

(JAMFX) - Get Report

Jacob Internet fund (down 72.1% this year).

In sum, these three funds raised about $2.4 billion in their subscription launches last year. The average U.S. stock fund has $981 million in assets, according to

Morningstar

.

The Junk Pile

As we near that time of the year when resolutions caloric and financial abound, the

Charles Schwab Center for Investment Research

has provided some painless tips that address both. For instance, if you drop that doughnut habit, assuming you darken the door of

Krispy Kreme

(KREM)

twice a week, you could save about $100 each year. If you tossed that money into the market each year for 20 years, assuming a 10% annual return, you'd end up with about $6,500. If you give up cigarettes and sock that money away in the same account, you'd end up with almost $30,000. Not to mention being around in 20 years.

Fund Junkie runs every Monday and Wednesday, as well as occasional dispatches. Ian McDonald writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to

imcdonald@thestreet.com, but he cannot give specific financial advice. Editorial Assistant Dan Bernstein contributed to this article.