And Now, a Word From the Hottest Fund This Quarter...

People love a horse race. And at the end of every quarter, the financial sections of newspapers write extensive stories on the best stock and bond funds for the last three months.

This, as we all know -- in our heart of hearts -- is a dumb way to look at investing. A three-month return doesn't tell you anything about a manager's stock-picking skills; hot performance is fleeting; a sector that's up a lot is very often expensive; and luck does apply to investing.

One way to deal with the flurry of senseless quarter-end fund reviews is to throw them on the barbeque.

Or, if you insist on reading the predictable recaps of the last three months, then you'll need a guide to know what the managers aren't saying in these stories. Consider some of the posturing [translation: lying] you'll witness quarter after quarter.

Here's my take on your garden-variety "quarterly fund performance" story, with some helpful translations for investors.

Three Cheers for Open Drain Fund!

Yelverton Smith's Open Drain fund was up 25% in the first quarter, topping all other funds in its category.

Translation: Look back another nine months and you'll see that the fund has lost half its value in the last year. And that's not including the pain it inflicted in 2000 and 2001.

The stocks in his portfolio have rebounded from very oversold levels, says Smith.

Translation: The dumb money has finally come back to these stocks.

"Just six short months ago, the market was treating these stocks as if the companies were going out of business. Clearly, these stocks aren't worthless after all," he says.

Translation: Well, at least not yet.

The fund's top-three positions are all up more than 50% over the last three months.

Translation: Those stocks went from being worth a buck a piece to a buck fifty.

All the stocks in the fund's top 10 are sporting double-digit gains for the quarter.

Translation: But the manager added seven of those 10 stocks to the portfolio two days before the quarter ended.

And he's still bullish on each company's prospects.

Translation: Anything to convince other folks to buy these ridiculously expensive stocks and take them off his hands.