The Big Screen: The Anthony Young of Stock Funds

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These days we're figuring out that the fund world's "buy and hold" mantra should come with an asterisk because it really depends on which funds you're buying and holding.

For years we've been told that no matter how bad things get in the market, you should make money if you hang on to a diversified stock fund for, say, at least three years. This seems sensible because otherwise we might be tempted to dump our shares in downturns and go on a buying spree in good times -- selling low and buying high, in effect. And a look at rolling three-year returns for the S&P 500 shows no down periods over the past 20 years, according to Chicago fund-tracker Morningstar.

But you'd be wrong to think you're bulletproof if you hang on for three or even five years. Plenty of stock funds trail the market by a wide margin each year and make bumbling a nasty and consistent habit. To prove our point, we've dug up a gaggle of bumblers in the growth-fund pack that have at least $200 million in assets and are in the red over the past one, three and five years.

So, Where's My Money?
Fund	One-Year Return	Three-Year Return	Five-Year Return
(POEGX Quote)Putnam OTC Emerging Growth	-72.9%	-9.7%	-7.6%
(FLRFX Quote)Invesco Blue Chip Growth	-70.4	-13.2	-0.5
(PBEGX Quote)PBHG Emerging Growth	-61.0	-4.5	-6.0
(JHNGX Quote)Hancock Large Cap Growth	-53.0	-10.5	-2.7
(SCDVX Quote)Scudder Development	-53.0	-2.1	-2.0
(MUIGX Quote)Gartmore Growth	-53.2	-12.5	-1.1
(MBQRX Quote)Merrill Lynch Growth	-46.0	-8.1	-5.3
(LDNRX Quote)Lindner Large-Cap Growth	-38.8	-8.3	-7.6
S&P 500	-24.1	6.5	13.4
Source: Morningstar. Returns through Sept. 5.

How badly have these funds faltered? Each trails more than 90% of its peers over the past three and five years. Over the past three years, they have averaged an annual 9% loss; over the past five years they've averaged a 4% annual loss. By contrast, the S&P 500's gains over those periods stand at 6.5% and 13.4%.

A portfolio of these eight funds would have lost about 10% annually in the three years ended July 31. By comparison, if you'd simply bought the no-load (VFINX Quote)Vanguard 500 Index fund, which tracks the S&P 500, you'd have averaged a 4% gain over the same stretch. ...