Are you spending your time looking at expense ratios, analyzing Morningstar ratings and searching for funds with low fees and no 12b1 charges?

If you are like most people, you know these things in and out. You've spent hours evaluating them, and your chosen mutual funds cost little to purchase and maintain. But they still don't perform to your hopes and expectations.

So, why is this happening? Because this kind of investing focuses on cost as opposed to value.

Investors with this philosophy have usually interviewed numerous advisors. But instead of trying to find someone suitable with a sensible approach, they only want to know who has lowest fees. That's like going to cheapest auto repair shop and getting best price, but your car still doesn't run well.

Then there are investors who call or email me wanting a recommendation on a no load mutual fund. They want one with no 12b1 charge, but they completely ignore issue of how fund might perform.

Both these kinds of investors spend their time trying to save pennies and in process they are losing dollars. Instead of falling into penny wise, dollar foolish trap, here are some ideas that will assist you in evaluating end profit rather than just short term saving.

According to John Bogle, former CEO of Vanguard Funds, one of most trusted authorities on investing in mutual funds and a strong advocate for ordinary investors, such investors typically get poor returns on their investments. How poor?

Between 1984 and 2002, average stock fund investor made just 2.7% per year on their fund investments! Hard to believe isn't it? Yet this is for a period during which S&P Stock 500 Index returned 12.2%, a -9.5% shortfall!

Expressed somewhat differently, had equity investor invested $1000 buy and hold in average equity fund beginning in 1984, their investment would have risen in value by $4420 by close of 2002, for a 9.3% return. But had he invested $1000 in S&P 500 Stock Index instead beginning in 1984, his profit would have been $7910.

But, folks, here's biggest part of problem: Since most fund investors tend to buy and sell as a function of mass psychology, which usually turns out to be wrong, average equity fund investor does far worse over years than long-term results had he merely bought and held his funds. So, if we track performance of typical investor's $1000 made at start of 1984, his profit would be a mere $660, or a shocking one-twelfth of that of $7910 shown above for S&P Index.

How does Bogle account for this tremendous shortfall by average investor? He attributes first 3% of annualized loss to management fees, costs of higher than 100% average turnover of stock portfolios, and other expenses incurred by average fund. As a result of such hefty costs, typical fund earns, as shown above, nearly 3% less than Index.