NEW YORK (CNNfn) - While most of Wall Street was swooning over technology stocks, fund manager Rich Moroney was quietly buying battered Dow Jones industrial average issues such as Merck and Citigroup.
But Moroney, of Strong Dow 30 Fund, had one of those days that managers dream about when the Dow posted its biggest point gain in history Thursday.
In just two trading sessions, Moroney's fund, which tracks the benchmark index, gained about 6 percent.
"It doesn't take a lot of money moving from big tech giants into Dow stocks to make a big difference," Moroney said.
Also in this column: The SEC proposes tough new rules on the implication of taxes on fund returns; and tax-conscious Eaton Vance releases a new study on investor awareness.
The fund, with about $122 million in assets, tracks the Dow 30 stocks with half of the portfolio. With the other half of the assets, Moroney and co-manager Chuck Carlson overweight Dow stocks that they think have the most potential.
While the Dow was heading lower, Moroney was busy adding to positions in Merck (MRK: Research, Estimates), Johnson & Johnson (JNJ: Research, Estimates), Boeing (BA: Research, Estimates) and Alcoa (AA: Research, Estimates).
Moroney also likes General Motors (GM: Research, Estimates), Intel (INTC: Research, Estimates)
"Everyone gives up on the Dow when it slumps," Moroney said. "It certainly hasn't matched the Nasdaq over a 10-year period...but I don't think everybody wants their entire portfolio in technology."
Like many managers, Moroney seems a little tired of the debate between so-called "old economy" and "new economy" stocks. He thinks that the lines between the two are blurred.
"Anybody who thinks Merck is not going to be part of the new economy is someone to me who hasn't given it a lot of thought," Moroney said. "It's a mistake to overlook a company like that (Merck), or a company like Citigroup that can capitalize on the new economy."
"Is Caterpillar part of the old economy? Probably," Moroney added. "But does that mean the stock has no upside going forward? I don't think so."
Moroney had expected a Dow rally after news of first-quarter earnings hit Wall Street. He was encouraged that the rally came sooner. How the first-quarter earnings bode for the rest of 2000 will determine whether the rally has legs, he said.
The Securities and Exchange Commission this week proposed new rules to improve disclosure to investors about the effect of taxes on their returns.
"Taxes are one of the most significant costs of investing in mutual funds," said SEC Chairman Arthur Levitt at a commission meeting Wednesday.
According to the commission:
- About 2.5 percent of each stock fund's total return goes to taxes every year.
- While tax-efficient funds may have no tax bite, the least tax-efficient funds can cost you 5.6 percentage points.
- The amount of trading that a manager does, along with the amount of gains realized on a trade, will affect the tax bite.
- Many investors lack a good understanding of the tax implications of mutual funds. Only 18 percent could identify the long-term capital gains rate, while only 33 percent felt they were very knowledgeable about the subject.
The proposal would require funds to include after-tax returns for one-, five-, and 10-years in the prospectus and annual reports to shareholders. The SEC is taking comments on the plan until June 30.
Speaking of taxes, tax-conscious Eaton Vance released a study Thursday showing that many people have a lot to learn about tax-efficient investing.
"A lot of people don't even know their tax bracket," said Duncan Richardson, manager of the Eaton Vance Tax-Managed Growth Fund.
The study of 500 investors showed that nearly one-third of people surveyed had no idea what "tax-efficient" investing means. And 35 percent of investors in the study couldn't site any investments that are tax-efficient.
About 56 percent of investors also said they would put a tax-managed fund in a retirement account - a big mistake, since those accounts are tax-deferred anyway.
There are about 30 tax-managed funds, and Eaton Vance has four of them. The funds limit their trades, buy on dips and use losses to balance out gains.
"Many stocks have gone through bear markets, pretty severe ones, so we've been accumulating them," Richardson said. "We're overweighted in financial stocks and accumulating the brokerages." 
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