Evidently, one mediocre year isn't enough to loosen the loyalty of some fund investors.

Tuesday's

column suggested that telecom funds, many of which have been around for more than a few years, are a way to invest in the Internet arena with funds that have some seasoning.

But reader

Robert Cullen

says I omitted the "granddaddy of telecom funds" --

(TISHX) - Get Report

Flag Investors Communications.

The $2.8 billion portfolio is indeed an elder of the group. It opened at the beginning of 1984, and Bruce Behrens has been the manager since day one. (Co-manager Liam Burke joined him in April 1997.)

Alas, Flag Communications didn't have such a banner year in 1999.

It returned 45.5% in 1999, more than 24 percentage points ahead of the broad

S&P 500

index. In any other year, that return would have been more than respectable -- it would have been downright fabulous.

That was not the case last year, when around 170 mutual funds produced returns in excess of 100% and the average communications fund returned 78.6%.

This year, this load fund is up just 2.2%, trailing 73% of its peers according to

Morningstar

.

"We didn't shoot the lights out," admits co-manager Burke.

But reader Cullen is right. The fund has a solid long-term record and deserves closer inspection. Its five-year annualized return of 41.4% beats about two-thirds of the funds in its category.

The managers, however, take a rather conservative approach, which shows in the fund's holdings among the larger, more-established telecom companies. It also means they didn't own some of the incredible fiber-optics equipment stocks -- like

JDS Uniphase

(JDSU)

(which has jumped 1,046% in the past year) -- that boosted the returns of many of the fund's competitors.

"It's an oversight on our part. You can really learn from your mistakes," says Burke. "You don't want to make the same mistake twice. But I don't think we have to jump in there just to be there."

SBC Communications

(SBC)

and

Bell Atlantic

(BEL)

together command about 16% of the fund's assets.

MCI WorldCom

(WCOM)

,

AT&T

(T) - Get Report

and

Sprint

(FON)

also are in the portfolio.

The fund also owns

Sun Microsystems

(SUNW) - Get Report

, which, Burke says, is positioning itself as telecom/Internet infrastructure provider.

The managers tend to be very devoted to stocks in the portfolio and hang on to them for an average of five years. (The fund holds about 40 names.)

That long-term perspective makes the fund's annual turnover (a measure of how frequently stocks are sold from the portfolio) an incredibly low 14% -- vs. a 93% average for its peers.

This approach also caused the managers to hang on to some holdings that weren't going great guns last year.

America Online

(AOL)

, the fund's largest position on Dec. 31, struggled in the middle of 1999 and is floundering this year, down 27.3% so far.

"We still very much like AOL," Burke says. "Clearly they did a very, very bad PR job in explaining how all their strategic initiatives convert into earnings and cash flow growth. But their acquisition of the under-Webbed

Time Warner

(TWX)

will help sustain subscriber growth and increase ad and commerce revenue."

Buying on a Great Big Dip

In February, I

spotlighted two stocks that

(TVFQX)

Firsthand Technology Value manager Kevin Landis was trumpeting in print, both of which subsequently blew up.

One of them was

Legato Systems

(LGTO)

, which imploded shortly after he mentioned it as his "One Stock to Own in 2000" in Brenda Buttner's

Under the Hood column.

Landis obviously believes in Legato, a developer of data backup and recovery software. He was buying it when it was down.

The fund's position in the stock climbed from 0.3% at the end of November 1999 to 3.2% at the end of January 2000, a period when the stock fell 62.7%.

"We believe the fundamental story hasn't changed," says Firsthand spokesman Steven Witt.

Right now, Landis looks pretty smart. The stock has recovered 45.9% since the end of January.

His other pick, mentioned in a

Fortune

article, was

Genesis Microchip

(GNSS)

, which is up 5.3% for the year.

Landis' Technology Value fund, meanwhile, continues to roll. It's up 54% in 2000.

Stubborn Investors

On

Wednesday, I castigated the phone reps at some companies for not discussing the potential volatility and risk of some aggressive funds with triple-digit returns.

Reader

Tige Prickett

says even if phone reps coughed up these caveats they would be wasting their breath and time.

"As a former 'phone jockey' for the

Van Wagoner Funds

, I can tell you that no matter what you say to potential investors, 90% of them have their minds made up. I agree that it should be made clear to investors -- especially investors who might have never seen a bear market -- that it is highly unlikely that a fund that posts triple-digit returns for one year will do the same in the next year," Prickett writes

"More often than not, a statement like this is followed with a response such as, 'If the fund does half as well next year, that will be fine.' Half as well as 291%? That will be fine? Despite the best efforts of fund companies to educate the investing public, greed will usually triumph over logic."

And when the market crumbles, regret will become the prevailing emotion.

Send your questions and comments to

deardagen@thestreet.com, and please include your full name.

Dear Dagen aims to provide general fund information. Under no circumstances does the information in this column represent a recommendation to buy or sell funds or other securities.