Market Watch : Fund Choices Grow--as Do Advisory Services : Investment: There is an array of newsletters to figure out which funds are best. But it’s hard to figure out the newsletters.

Have trouble picking stocks? Try looking for a mutual fund. The choices are dizzying.

There’s stock, bond, growth, global, flexible, balanced, convertible and mixed funds--to name a few. There are loads, no loads, high fees and low fees. In fact, there are twice as many mutual funds as companies listed on the New York Stock Exchange.

Not surprising, there is also a wide variety of measures to gauge mutual fund performance. And a plethora of publications trying to help investors sort it all out.

“With the proliferation of mutual funds, we’ve seen a proliferation of newsletters and services that purport to follow the funds and advise investors as to which funds they should consider,” said Patricia Harden, spokeswoman for Fidelity Investments, one of the nation’s largest mutual fund companies. Do they work? “Yes and no,” Harden said.

In recent weeks, investors have been barraged with several more--from Business Week’s two-part series to Forbes’ expansive tome, as well as rankings by Lipper Analytical Services, which are published quarterly in The Times.

But these rankings and ratings may just add to the confusion because few consider the same funds to be top-notch.

“In general, most of the services are quite accurate,” said A. Michael Lipper, president of Lipper Analytical Services in New York, which tracks mutual fund performance. “The differences are not mistakes but different measurement techniques.”

Business Week tries to account for risk, while Forbes looks at performance in down markets. And The Times simply publishes rankings of total return over specific periods of time. Other services weigh in a wide variety of measures, including fund size and liquidity.

But even when rankings do agree, experts say it is not always advisable to pick last quarter’s or last year’s top performer.

“It is probably wrong to pick the short-term top performer, because they rarely repeat over a short period of time.” said Ken Waggoner, spokesman for T. Rowe Price Associates in Los Angeles.

So how does one choose?

First, investors must answer a raft of personal questions, starting with their age, affluence and willingness to take risks, said William E. Donoghue, publisher of Donoghue’s Moneyletter, a newsletter on choosing mutual funds. They also have to decide whether they want to make investment decisions themselves--and possibly save commissions and fees by buying into a no-load fund--or whether they are willing to pay more for the counsel of a financial planner or broker. Finally, they must determine whether this is a short-term or a long-term investment, and whether they plan to watch it closely.

Watching long-term investments on a day-to-day basis is a big mistake because sometimes investors panic and sell at the wrong time, “turning what might be a brilliant long-term decision into a disastrous short-term investment,” Lipper said.

Then it’s time to look at the rankings and ratings. The two differ because the first simply reports yields, while the other tries to factor in additional information, such as risks, liquidity, investment objectives and the like.

The rankings are helpful because they provide a simple, objective measure of a fund’s return over specific periods of time. Firms such as Lipper report these yields over periods as short as a week and as long as 30 years.

Others try to qualify the numbers by looking at additional measures to determine overall performance.

The recent Business Week rating, for example, assesses risks by weighing in the volatility of the funds’ investments. Business Week, consequently, recommends some lower-yielding funds because they are considered low risk.

Still, experts acknowledge that the risk formula is flawed in that it can only track volatility as a proxy for risk. It cannot weigh the less quantifiable dangers in the underlying portfolio. Consequently, junk bond funds may come out as “low-risk” ventures because their returns were relatively stable until recently.

Meanwhile, Forbes ranks funds by total annual yields, but it also grades them on their performance during good times and bad. Some of the top-yielding funds--such as the US Gold Shares fund--got “D” ratings during both good and bad market cycles, Forbes reported.

Others, such as the Mexico Fund, did spectacularly well during up markets but relatively poorly when the market soured. And the Strategic Investments Fund got an “F” for its performance during good markets and a “D” for bad. How it become one of the top yielders on Forbes’ Feb. 5 listing is unclear.

RATING THE MUTUAL FUNDS

The top-performing funds and their rate of return according to three recent surveys.

Lipper and Forbes returns are for 1989. Business Week lists average.

Lipper Analytical Forbes Business Week Alger Small Mexico Fund (67.3) Fidelity Capital (65.08) Overseas US Gold Shares US Gold Shares Merrill Lynch (64.73) (64.7) Pacific (33.7) Strategic One Hundred Japan (32.0) Investments (61.21) Fund (64.3) GT Global Growth: Strategic Trustees-Comm Japan (60.73) Investments (61.3) Intl Eq (30.7) Financial Port: Van Eck Kleinwort-Benson Health (59.72) International (51.2) Intl Eq (30.7) Vanguard Wld- Intl Growth (30.70

*formerly Drexel Burnham Fund