Most people wouldn't believe a used-car salesman who said, "Water is wet."

And investors should use a little of that skepticism the next time they buy a mutual fund.

The fund business is about selling, too. Fund companies make money based on how much dough they have in their funds. And the goal is always to attract more dollars.

To do that, fund firms will hawk what's easy to sell. Today those are funds that supposedly deliver protection, income or solid performance in any market.

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But a good pitch does not always make a good investment.

Guaranteed to Not Lose Your Money

Three years ago, mutual fund companies were offering an assortment of tech and telecom funds for the taking. Those investments had been hot and people were snapping them up.

Now that those funds have collapsed like balsa-wood buildings, the fund business has moved on to what investors are clamoring for today: safety and security.

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One concoction is the principal-protected fund. These funds typically own a collection of stocks, bonds and cash wrapped up in an insurance contract that protects your principal, as the name says.

They sound like great investments. Of course, there's a catch or two. First, you have to keep your money in the fund for a set period of time -- say five years. If you withdraw it sooner, you'll lose that guarantee to get all of your original investment back, and perhaps pay an extra fee.

And with these funds, you have to worry about plenty of fees. The new ING Principal Protection Fund IV is a good example. This fund guarantees you'll get your principal back if you hang on to it for five years. But its expenses run from 1.75% to 2.50% a year, depending on which share class you buy.

Wait a minute. The average all-stock stock fund in this country costs about 1.5% a year. And a fund that invests in stocks, bonds and cash is usually cheaper than that. This ING fund isn't. You're paying extra for that guarantee of safety.

Plus, this load fund's annual expenses don't include the sales charge you'll pay to buy the fund in the first place.

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)

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.

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.