Here's What Fund Salesmen Are Trying to Pitch You Now

Here's another idea: an investment that will give you all of your money back in a few years and pay you interest too! It's called a CD.

The point is you can always find safe investments -- whether it's CDs or U.S. Treasuries -- that won't hit you with sales charges and hefty expenses every year.

Incredible Income

With interest rates at generational lows, people are desperate for income-producing investments. But a fat yield on a fund doesn't tell you everything you need to know about what the actual returns will be.

Check out the advertisement for the Strong Ultra Short-Term Income fund that's been popping up everywhere. The ad promotes the fund's 3.34% yield. But take a closer look at the fund's long-term returns. Its five-year record ranks in the bottom 30% of ultra-short bond funds, according to Morningstar.

Ultimately, you want to find a fund that will deliver an above-average return at the end of the day. This Strong fund has not. You wouldn't pick a stock fund on yield alone. You shouldn't pick a bond fund that way either.

No Pain and Very Little Gain

After suffering steep losses over the last three years, investors are also clamoring for funds that will hold up in any market -- bull, bear or otherwise. Enter the market-neutral fund.

In theory, a market-neutral fund's performance isn't supposed to be correlated to broad swings in the stock market but should still beat Treasuries, which is a risk-free investment. The reality is altogether different.

Take the (JAMNX Quote)James Market Neutral fund. A mailer sent out by this fund company mentions this offering (among others run by the family) and lays out the fund's returns. On the surface, the numbers do look good. They're all positive, which is better than the stock market's returns. But since this fund's inception in late 1998, its performance hasn't beat a 90-day T-bill index.

When a fund's name or advertising promises something, you have to make sure it can actually deliver. Some do. Plenty don't.

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Dagen McDowell also writes a column on protecting your portfolio for TheStreet.com's Save Safe Plan. Interested? Click here for more information and a free trial.