It's probably the most popular put-down around these days.

No, I'm not talking about "You're

Red Sox

fan!" Rather, "You're a mutual fund investor!" One reader recently accused me of as much, albeit quite politely. Wrote

Stephen Powers

of Vermont: "Why does a person with your resources, exposure and knowledge still choose mutual funds over individual stocks?"

It's certainly not a crazy question. After all, compared with stocks, funds have a lot of counts against them.

First, there are those fees. In most places, competition means lower costs to consumers. Not in mutual fund investing. The number of new funds has grown exponentially. So, too, has the number of assets in them. But fees aren't going down, despite new economies of scale. Pay linked to performance? Not here. In general, the worse funds perform, the more they charge. Plus, even if customers avoid sky-high expense ratios and loads, they can still get hit with a charge after they sell.

And that's not the only price they pay.

Where else can you lose money and still owe Uncle Sam? Yep, whenever a manager sells a holding for a profit, customers get hit with a capital-gains bill. And this often happens at the worst of times. When shareholders are bailing because of poor performance, managers often have to dump some of their best stocks to meet outflows. Of course, they sometimes sell even when they're not forced to. The average turnover rate for U.S. diversified funds last year was 84%.

Then there's the pesky problem of style drift or fickle funds. The mutual fund you thought you bought often turns out not to be what you expected. Managers often go with the style of the day. Value's not working? Shift to more aggressive growth. Small-caps out of favor? Chase the bigger ones. This makes it awfully hard to stick with your plans for diversification. You rarely have the same problem with individual stocks. When you buy

IBM

(IBM) - Get Report

, you can pretty much count on it not being a tech company one day and a shoe retailer the next.

Plus, there are just so damn many funds. The number of mutual funds has almost doubled in the past five years. By some counts, there are more than 10,000 open-end funds. It's definitely a daunting list -- and choosing the right ones just seems to get more and more complicated as well.

Last, but certainly not least, there's just plain ol' poor performance -- and that is considered by many a kind description. In the past five years, just 48 of 3,534 U.S. diversified funds beat the

S&P 500

. The typical defense of most active managers? They really shine when times are tough. But when the bear started growling last summer, many of them headed south faster and further than the stock market.

No wonder it's chic to complain about funds. You might easily say they have it coming. Stephen, it's a good question. Why not just go with stocks instead?

Here's why.

First, fees. I pay a lot of attention to expense ratios when choosing my funds. I watch for loads and rarely invest in load funds (even though, in my opinion, the debate is not load or no, but high-expense or low). You don't have to buy the priciest ones -- especially if their long-term record doesn't seem to be worth the price. And it is possible to find funds with rock-bottom prices. Just start with index funds.

You have to consider costs when buying stocks. They're not free. Yeah, over the Internet, you can get some good deals, but contemplate this: Do you factor in your broker's commission when figuring out your return? You don't have to with mutual funds. Expenses are already worked in when you see your return there.

Now, let's talk about time. When I follow my investments, I want to be able to follow them. I can survive with six to 12 mutual funds (see my column on

How Many Funds Should You Own?), and many investors go with far fewer. I would have to own at least double that number of stocks to get adequate diversification. I just don't want to deal with the paperwork and time it would require to watch over them. Better to let a professional manager handle those hassles.

And let's discuss picking the right ones. Yes, facing that growing list of mutual funds can intimidate almost any investor. But the 10,000 number includes all the share classes, which vastly inflates the actual number of funds. And if you follow a few simple rules (check out

mine in a column in

TSC's

Basics section), you can pare down the overwhelming list to a short list of funds that fit your particular investment goals.

Picking the right stocks is still easier, you say? Well, maybe that's been true in the past few months. You could pretty much bet on the big guys in the S&P. But beyond that, choosing the correct stocks, the ones that suit your plans and portfolio, has been far from easy. Here, traditional rules haven't exactly been in play. (How many times have you counted on the prediction, "It's time for small-caps to have a day in the sun?") With small firms or foreign ones, I'll definitely stick with mutual funds.

Even the most legendary stock-pickers have had some trouble recently. Take

Warren Buffett

, who admits that, lately, he would have been better off if he "had regularly snuck off to the movies during market hours."

Now, for the performance issue. Sure, some of you out there groan when comparing your stock portfolio with your fund results. But you may be among the lucky. Everyone talks about how fund managers can't keep pace with the S&P. Well, what about stocks? Over the past five years, of the more than 4,400 stocks that have been around that long, more than 3,700 underperformed the S&P's average annual return of 24%.

No, funds are not perfect -- far from it. This defense is not meant to imply that I

only

go with mutual funds. My portfolio includes a number of individual stocks, but it's certainly true that the bulk of my savings is in funds.

This week, as we celebrate the 75th anniversary of the creation of the very first mutual fund, it's worth remembering what we owe them. For millions of us, they were our first investment vehicles; they allowed us to profit from Wall Street while, at the same time, taking money matters in our own hands.

So hit me with your best shot: Go ahead and call me a mutual fund investor.

And next week, watch for my defense of the Red Sox.

I'd like to hear from you. I know this debate pushes a lot of hot buttons.

Email me with your thoughts, and I'll include them in an upcoming column.

Brenda Buttner's column, Under the Hood, appears Thursdays. At time of publication, Buttner had no positions in the funds mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks or funds. While she cannot provide investment advice or recommendations, Buttner appreciates your feedback at

TSCBrenda@aol.com.