Worse Than Average

In 1994, I invested $22,000 in some mutual funds via a full-service brokerage’s financial adviser. The adviser never mentioned that 4 percent would be taken out immediately as a load fee.

Three years later, I was down 40 percent. I asked to be switched into certain other funds, but they performed poorly, too. I finally gathered the courage to sell all my holdings in 1999. I ended up with about $25,500, giving me an average annual gain of only about 3 percent — during a period when many other funds were averaging 11 percent or more. — S.P., online

The Fool Responds: The S&P 500 was actually roaring during those years, gaining 37.6 percent in 1995, 23 percent in 1996, 33.4 percent in 1997, 28.6 percent in 1998 and 21 percent in 1999. Those returns were far above its long-term average annual gain of close to 10 percent, and you could have enjoyed roughly those gains had you been invested in a simple, low-fee S&P 500 index fund.

Index funds outperform most managed stock mutual funds over long periods. You top that if you manage to find the relative few funds that beat the market, but that’s easier said than done.

You learned that it’s vital to examine fees before investing — especially loads that lop off a chunk of your investment. Remember, too, that any fund can have a bad year or two.