Investors to money-market funds subtracted $34.53 billion in the week ended Tuesday, bringing total net assets to $3.416 trillion, according to the Money Fund Report."

About 71% of investors don't trust the fund industry.

Meanwhile, 66% say fund firms don't take responsibility to protect investors' financial well-being.

In fact, mutual funds are at the bottom of the list of trusted service providers -- below mechanics and insurance agents.

Investors' major source of distrust is the disclosure of fees, risks and tax implications. These caveats are spelled out in excruciating detail in funds' unreadable prospectuses (which are supplied to everyone except retirement savings plan participants)"

With actively managed mutual funds, more is not necessarily better. Studies show that owning four funds in the same asset category is virtually certain to create a 'closet index fund,' which means that the combined performance of the funds winds up doing no better than the index for that asset class

Plus, that index-or-worse overall performance comes at a much higher cost than simply owning a mutual-fund or exchange-traded fund tracking the index.

...Ultimately, an investor can build a winning portfolio with no more than six funds covering domestic and foreign markets, large- and small stocks, bonds and money-markets. Sector funds and other issues can be used to flesh out the holdings and tilt the assets to areas the investor prefers, without creating massive overlap with the core holdings.

A portfolio that's a little more complicated is fine, but going much further -- with closer to 20 funds than a half-dozen, and with too many decisions to make -- is almost sure to leave you with an unmanaged mess."

'It's a good time to check up and see if your fund is performing worse than you would have expected in a tumultuous environment,' said Christine Benz, director of personal finance at investment researcher Morningstar Inc. 'If performance is worse than you expected, then maybe the fund is a bad match for your risk tolerance.'"

Investment advisers are increasingly pessimistic about U.S. stocks, with many expecting further losses as higher inflation, rising unemployment and a weak housing sector take their toll, according to a survey released Wednesday.

The survey of 1,006 financial advisers by brokerage firm Charles Schwab & Co. Inc., taken in late January, showed investment professionals are much gloomier about the U.S. market's near-term prospects than they were in a similar poll in July....About 46% of respondents say the Standard & Poor's 500 Index will be higher in six months, down from 67% who felt that way in July. Forty-one percent predict the benchmark will be lower versus 18% who said so in July....

About 80% of respondents see housing prices continuing to soften and the same number forecast higher unemployment in six months, compared to just 35% who did in the survey in July....

...Accordingly, many advisers are taking a defensive stance with clients' investment portfolios...About one-third of advisers say they'll invest more in large-cap U.S. and international stocks. Raising cash is part of the strategy for 28% of respondents, up from 16% in the previous survey, and 27% will boost bond positions, up from 18% last July.

...Utilities, many of which offer a cushion in the form of quarterly cash dividends, was the fourth most-favored sector, with 30% of advisers choosing the category compared with 11% in July....

Advisers are less sanguine about technology...

... Enthusiasm for Japanese shares has deteriorated since the July survey, when 40% of advisers thought Japan would be the best-performing developed market....Among emerging markets, advisers expect the best results from China and India (tied at 36%), followed by Brazil (33%) and Russia (23%)....Meanwhile, advisers anticipate investing less in U.S. small-cap stocks and their international counterparts in both developed countries and emerging markets."

Although many investors are swayed by evidence of excellent recent performance, statistically, it is unlikely that fund managers will manage to do well consistently over a period of years.

'There is some evidence that last year’s winners tend to repeat next year. But it is very slight. Mostly the effect comes from the fact that really bad funds stay bad. Their expenses are high, and their choices stay haphazard,' said Paul Samuelson, an academic, in his article 'The Long-Term Case for Equities', which appeared in the Journal of Portfolio Management in 1994.

However, this does imply that it is worth considering performance, if only to avoid the poor performers.

...When choosing an investment fund, performance is important. But it is also important to bear in mind that even excellent performance can be eaten up by investment management fees. A cheap index fund might do better for the investor than a well-managed active fund, so performance should not be the only consideration."

"A number of financial advisers are cheerleading for ETFs. In my observation, this advocacy is self-serving, because such advisers have investment-management businesses built around using ETFs. And, in a competitive marketplace, they want to be different and appear current to appeal to novice customers.

In Edelman's case, he has written a purposely provocative and hyped book telling his readers the following:

'The retail mutual fund industry is ripping you off. ... You need to sell all your retail mutual funds. ... The fact is that the retail mutual fund industry is now flush with liars, crooks and charlatans. Daily business activities include deceit, hidden costs, undisclosed risks, deceptive trade practices, conflicts of interest, and fundamental violations of trust — all at your expense. Since September 2003, the retail mutual fund industry has paid out more than $5 billion in fines.'

That does indeed sound pretty awful, doesn't it?

...What's ironic and hypocritical of Edelman's comments is that he said in a prior book, 'I hate index funds.' Well, ETFs are index funds that you trade on a stock exchange!

ETFs are similar to mutual funds, with the most significant difference being that in order to invest, you must buy into an ETF through a stock exchange where ETFs trade, just as individual stocks do.

Thus, you need a brokerage account to be able to invest in ETFs.

ETFs are most like index mutual funds in that each ETF generally tracks a major market index. (Beware that more and more ETFs are being issued that track more narrowly focused indexes, such as an industry group and small country).

The best ETFs might also have slightly lower operating expenses than the lowest-cost index funds.

However, you must pay a brokerage fee to buy and sell an ETF, and the current market value of the ETF may deviate slightly from the underlying market value of the securities in its portfolio."

Declines of more than 10 percent in the major stock market indexes over the past few months, along with the growing expectation of a recession, have set off a massive investor call to action.

By action I mean the urge to flee stocks for the apparent safety of bonds or cash. For the vast majority of investors, that move can be a costly mistake....

...Fear is natural, but there's a right way and a wrong way to handle fear when it comes to finances. Knowing when to act and when not to act is one of the keys to financial security.

Right now, we're all being put to the test.

....For these long-term investors, the best advice is to do nothing. Yes, nothing. If you have a well-diversified portfolio that's focused on building value over the next few decades, it doesn't make sense to overreact to a few months of volatility and bail out on stocks. It's no fun watching your portfolio fall, but you need to focus on a bigger problem: If you put all your money into super-low-risk investments such as money markets or stable value funds, you increase your risk, too -- the risk that your portfolio won't grow enough over time to build a hefty retirement account...

...If your investment time horizon is 10, 20, or 30 years, stay invested in your stock funds and ETFs. Over time (meaning decades, not weeks), stocks have consistently outperformed other types of investments. That includes periods when the stock markets fall. Doing nothing is going to net you better long-term results than doing something."

How much are you worth these days? One journalist estimated my liquid net worth at $25 million. That’s pretty close. My houses are worth another $7 million...

What do you do with the rest of your money? Save it and build it in municipal bonds. I buy zero-coupon municipal bonds, and all the bonds I buy are triple-A-rated and insured so that even if the city goes under, I get my money. I take a little lower interest rate to make sure my bonds are 100 percent safe and sound.

Do you play the stock market at all? I have a million dollars in the stock market, because if I lose a million dollars, I don’t personally care."