NEW YORK ( TheStreet) -- As the credit crisis unfolded, many mutual-fund shareholders made ill-timed trades.First, investors panicked and sold near the stock-market trough in 2009. Then, as stocks revived, shareholders began buying -- after prices had already risen. Moving in and out of the markets at the wrong times, investors suffered miserable returns. A new study by Morningstar suggests how damaging such self-defeating moves can be. On average, investors lagged well behind the results they would have achieved by buying and holding funds. In the study, Morningstar started by tallying 10-year total returns. These are the familiar figures that show how much shareholders would have earned if they bought at the beginning of the period and held to the end. Then Morningstar calculated what it calls investor returns, the amount the average dollar actually achieved. Because dollars moved in and out of funds at the wrong times, investor returns were typically much lower than total returns. While U.S. equity funds had total annual returns of 1.6% during the past decade, the investor returns were only 0.2%. Investors in bond funds also proved inept. When municipals collapsed in 2008, many shareholders sold their funds and missed the subsequent rally. That explains why the 10-year investor returns for municipal funds were 3%, compared to total returns for the group of 4.6%. One noteworthy finding concerns balanced funds, conservative choices that hold mixes of stocks and bonds. Sometimes dismissed as old-fashioned choices, balanced funds served shareholders well during the market turbulence. For the decade, the investor returns for balanced funds were 3.4% compared to 2.7% for the total returns. Why were investor returns higher than the total returns? Investors boosted their results by hanging on through downturns and steadily buying in up and down markets. The success of balanced funds demonstrates the virtue of owning cautious funds. Investors who stick with low-risk funds are less likely to suffer the kind of losses that cause shareholders to panic and sell during downturns. Before buying any fund, you should consider its investor return. Some funds with top total returns have low investor returns. This occurs because volatile portfolios frighten shareholders who sell at the wrong times.