Dodge & Cox Stock ( DODGX) returned 15% annually in the five years through March 2004, outdoing the S&P 500 Index by more than 16 percentage points. But then the picture changed. For the five years ending this March, the fund lost 6.6% a year on average, lagging behind the benchmark by 1.8 percentage points.

Does past performance provide any guidance about future results? Investors' frustration is particularly severe these days because of the market turmoil. Funds that once ranked at the top of the standings have suddenly sunk into the cellars.

But the recent erratic showing of funds doesn't mean investors should ignore past performance. By studying performance carefully, investors can get an idea of how a fund is likely to fare in the future relative to benchmarks.

Even the best managers suffer bad stretches, and a single poor year can devastate five-year returns. To get a clearer picture of long-term patterns, examine the results one year at a time.

Consider Dodge & Cox. Since 1980, when Morningstar started tracking the fund, it had outdone the S&P 500 in 17 years and trailed in 12.

While the numbers bounce up and down, there are few surprises. Dodge & Cox is a large-value fund, and it tends to outperform when its style is in favor. From 2000 through 2006, value stocks led the markets, and Dodge & Cox clobbered the S&P 500. Then with financial and other low-priced stocks struggling in recent years, large-value funds trailed the index, and Dodge & Cox also lagged behind.

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