First, and most obvious, is that mutual funds own stocks that do very well and very bad at varying times. Recently, the market has been extremely volatile. Sometimes it is up sometimes down, but always unpredictable. This causes major dilemmas for managers who hardly know which stocks to sell or hold in an effort to bounce back. The second point has been touched on, and that involves the price of stock and the size of the fund.
Huge funds have a much more difficult time unloading lagging shares.
With companies such as Qualcomm and Yahoo nowhere near their 1999 highs, it has been hard for them to bounce back. In the mean time, they have also missed some incredible buying opportunities from stocks that were unjustly beaten down. As a mutual fund buyer, there are some important things you have to look at. Do a little studying, get comfortable with what your funds invest in. If you feel biotech will continue the pace, go for it.