Without a Net: The Perilous State of Internet Funds

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Net Funds' Collapse Highlights Risks of Sector Investor

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Thanks to their mercurial performances and glaring instability, Net funds earn comparisons with Robert Downey Jr. and merit our attention as a cautionary tale of excess.

At the start of 1999, there were just four Net funds and most fund company executives scoffed at them as too narrowly focused and aggressive. Then those four funds averaged gains of more than 200% that year, triggering a glut of investors' cash and new Net funds in 2000. Of course, all of those performance-chasing greenbacks and funds showed up just in time to absorb a drubbing of historic proportions, as TheStreet.com's Internet Sector index lost nearly three-quarters of its value last year.

Hardly Dot-Calm Owning Net stocks or funds has felt a lot like riding a tiger over the past couple of years
	TheStreet.com Internet Sector Index	S&P 500
YTD Return	0.5%	-0.6%
2000 Return	-73.4	-9.1
1999 Return	184	21.0
Source: Baseline/Thomson Financial. Returns through May 21.

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