Some reader letters deserve answering, even if they are put-up jobs.

P.W. in Dallas writes: "You get e-mails all the time from readers such as myself, who, looking for long-term results, continually ask, 'Why not run a feature on loaded mutual funds as good as these?' The funds are SHRAX, SHAPX, SHFVX, and SOPAX.

"Well, why not?"

For the record, I seldom get such questions, but the subject of reader questions and what they represent is, in itself, worth our attention.

Most readers ask questions about funds they already own. They do this because they want to know whether they made a mistake. Basically, they are looking for a second opinion.

It's also important to understand that people don't ask questions about the fund that doubled last year. They ask questions about funds that lost money or went nowhere. Basically, reader questions have a negative bias, what statistical folks call "adverse selection." People write to this column because they are worried about their investments, not because they are packing for the beach.

When I answer those questions I usually provide benchmarking information such as how the funds have performed relative to their category as well as their annual expenses and turnover. The funds that readers are most likely to ask about are, by rank order:
  1. The largest no-load funds, particularly those in 401(k) plans. This is a market dominated by Fidelity and Vanguard. T. Rowe Price and American Century funds are distant seconds. Since qualified plans are where most workers save and invest, there are millions more people asking about these funds. This is a matter of raw numbers.
  2. The largest non-proprietary load funds that are available through the online fund supermarkets, most brokerage firms, and frequently used in 401(k) plans. The dominant force here is the American Funds group. PIMCO is in this group. MFS and Putnam are distant seconds, but I got a lot of reader mail about Putnam funds when the Internet bubble burst. Why? Because its funds did especially poorly.
  3. The largest proprietary load funds bring the least questions because they tend to be smaller and have fewer shareholders, even though they are sold by their sponsoring firm--- Merrill Lynch, Smith Barney, and other large houses.
The funds mentioned in T.W.'s letter, for instance, are all Smith Barney funds. They have great track records. With the exception of Smith Barney Fundamental A shares (ticker: SHFVX), all are top 20 percent performers. The largest of the group, Smith Barney Aggressive Growth (ticker: SHRAX), has $10.5 billion in assets under management. The smallest, Smith Barney Capital and Income (ticker: SOPAX), has $2.7 billion in assets under management. The combined total assets of all four funds is $23.6 billion.

Now compare those asset figures to the $137 billion in the American Funds Growth Fund, the $110 billion in Vanguard 500 Index, the $93.5 billion in PIMCO Total Return fund, or the $65 billion in Fidelity Contrafund. (The asset figures all come from the Morningstar mutual fund database.) In that group you'll also find American Funds Investment Company of America, Euro Pacific fund, and Washington fund, with assets of $81.2 billion, $78 billion, and $77.9 billion, respectively. On this scale, the largest of the Smith Barney funds mentioned ranks 95th. The smallest ranks 427th.

Bottom line: Even if I was a full-time mutual fund columnist, which I am not, proprietary funds would get relatively little attention because they are a relatively small factor in the mutual fund universe. While many in the brokerage community feel this relative neglect is a nasty media conspiracy, the reality is that we simply reflect the investments of our readers.

The same reality applies to esoteric investments like hedge and commodity funds. You generally need to be a "qualified investor"--- someone with at least $1 million in financial assets--- to make such investments. That's why you won't see many columns on the top three hedge funds in your daily newspaper.

Finally, there is another reason you won't find much about the fund of the moment in this particular column. I've been writing about investing since the early '70s, and I started in Boston, home of Fidelity, MFS, Putnam, and other firms with long histories. Over the years I noticed something: Performance is ephemeral, but fees are eternal. Worse, the majority of funds routinely fail to do better than the benchmark index against which they were measured.

That's why managed funds are seldom discussed in this column. It's also why passive index investing is discussed quite often. I think a 70 percent chance of beating a managed fund is about as close as we get to the investment equivalent of shooting fish in a barrel.