(MONEY Magazine) – After five years of investing in funds, Mark Ziehr, a 26-year-old who audits pension and trust funds for Chicago's Northern Trust Bank, has decided he's going to be a stock guy. He wasn't dissatisfied with his funds' returns, but he's certainly been dissatisfied with his tax bill. Last year, for example, his $24,800 investment in the Alliance Capital, Strong Opportunity and Oakmark International funds threw off roughly $3,000 in capital gains, which he estimates will add about $900 to his 1997 taxes. "The thing with mutual funds is, you have to take the gains they give you," says Ziehr. "And I definitely would rather call the shots."

So, aside from his company's 401(k)-like thrift plan, which offers him only funds and his employer's stock, Ziehr has begun doing all his investing through individual stocks. Over the past two years, he's already built a modest portfolio, buying technology stocks such as software titan Microsoft and chipmaker Intel as well as nontech names like General Electric and Nike. For investing ideas, he peruses research reports supplied by his broker at Edward Jones, consults the Value Line Investment Survey at a public library near his home and surfs the Internet.

Ziehr is well aware that stocks are riskier than funds. In 1996, one of his individual stockholdings, United Healthcare, fell 30% in one day when earnings came in below analysts' expectations. But after assessing the company's long-term prospects, he decided to hang in. Seven months later, the stock had regained the loss. "I panicked a little," he says. "But I knew it was a good company and would eventually come back."

One trap Ziehr won't fall into is rapid trading. He's a confirmed buy-and-hold investor, partly because of some of the funds he sees at work. "I want my portfolio to resemble some of the ones that cross my desk, where the average purchase price for Coca-Cola is only $5 a share," he says. "I don't want to realize a gain. I don't want to realize a loss. I just want my money to grow."

--Jeanhee Kim