Morgan Stanley Dean Witter, Alliance, and Dreyfus had the highest percentages of these cellar dwellars, followed by IDS and Merrill Lynch. All of these shops have proven standouts as well. But given their propensity to turn out clunkers, investors should be particularly wary before buying a new fund from one of them. That's a sign that they are more careful about which funds they roll out and about replacing managers who can't cut it. Though not immune to duds, Vanguard, Putnam, and Fidelity are all pretty quick to pull the trigger on disappointing performers.
Many investors consider losses, even short-term ones, to be the most serious risk.
We singled out all funds that have lost money for the trailing three-year period, regardless of how well they performed in their category. American and Janus had no losers at all. On the other hand, American Funds' offerings have done a nice job of avoiding losses even though recent market trends have worked against them. And you'll never see them launching a fund in the latest hot asset class. Probably the best indicator of fund-company risk is average risk scores.