Doug Fabian, the president of the Fabian Wealth Strategies investment advisory firm and editor of the "Successful Investing" newsletter, has for the past 10 years been publishing an uncharacteristic appraisal of selected funds.

The California newsletter publisher differentiates himself from conventional advisory services by quarterly publishing a "Lemon List," which he defines as a scorecard of the "worst-performing mutual funds."

His current lemon list, summarizing results for the first quarter of 2008, focuses on what Fabian termed "dividend disasters." The roster includes the "value" and "dividend-oriented" mutual funds that he feels are prime candidates for avoidance by investors.

"Investors who own these dividend disaster funds should strongly consider repositioning their assets to much safer and better performing funds," he advises, adding that "they should strongly consider a move toward low-cost, objectively managed exchange-traded funds."

The Lemon List, summarized in the accompanying charts, includes Fabian's suggested ETF alternatives for investors who dump the traditional open-end funds he has unmasked as sour fruit.

Of the 10 funds tagged as lemons by Fabian, there are nine with grades from Ratings -- and they all ended the quarter with marks that equate with "sell" recommendations. Eight of the nine finished with grades in the "E" range, with two graded at the lowest possible level of E-. The mark for the remaining fund was a "D".

The ETFs selected as Fabian's choices of alternatives to the lemons average considerably less in annual expenses than the mutual funds that he recommends avoiding. The ETFs' average expense ratio of 0.22% (22 cents per $100 of assets) is barely a fifth of the 1.01% in average total annual shareholder expenses levied by the lemons.

While the passively managed ETFs all save their holders in the area of current expenses when compared with the open-end lemons, investors should keep in mind that brokerage commissions and bid-asked "spreads" on each side of transactions add to the hidden costs of ETF ownership. Buy-and-hold strategies amortize these costs of longer periods, thus lowering overall annual effective ownership costs to holders.

TheStreet Recommends

One of the ETFs is unrated as yet by Ratings, and two of the remaining funds appear twice. So of the seven ETFs with grades, five are in the "B" range, which equate with "buy" recommendations. The lone "hold" recommendation, the

iShares S&P 500 Growth Index ETF

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, has a mark of C+ -- only a single notch below "buy" territory.

Similarly, the one ETF with a "sell" recommendation, the

iShares S&P MidCap 400 Value Index ETF

(IJJ) - Get iShares S&P Mid-Cap 400 Value ETF Report

is graded D+, which is only one increment below a "hold" rating.

Richard Widows is a senior financial analyst for Ratings. Prior to joining, Widows was senior product manager for quantitative analytics at Thomson Financial. After receiving an M.B.A. from Santa Clara University in California, his career included development of investment information systems at data firms, including the Lipper division of Reuters. His international experience includes assignments in the U.K. and East Asia.