Investors experienced a classic example of this roller coaster during the 1999–2001 period. Growth and tech funds got hot and then abandoned. Value funds and energy funds were abandoned and then got hot. Fund managers were not hurt, though. Fund managers’ pay increased by 35 percent during the period. In the mid-1990s, financial sector funds got hot and then were abandoned in the late 1990s. In 1997, real estate funds were hot, setting up investors for two years of losses in 1998 and 1999.

Some funds have learned to avoid wild swings in value. They do so not for your benefit, but for theirs. The goal of fund management firms is to gather and hold ever-larger amounts of your money. Fund managers are paid a percentage of funds under management. Fees are not based on returns or other criteria that benefit you. The larger the fund, the larger the fee. Primarily, though, fund managers must assure that funds never close.

And in fact, they rarely do. Since 1970, the number of funds has declined in only one year, 1975. Even in bear markets, the number of funds grows. This game is too good to give up, for the fund managers. The average fund manager earns more than $430,000 per year, despite the fact that Morningstar data shows that the average fund manager has never outperformed the market over a single five-year period.

Mediocre funds with low volatility tend to grow their assets under management for decades. You may be happy to pay fees for mediocre results as long as you avoid the roller coaster. Or, you may feel the fund takes advantage of your loyalty. You may find that mutual funds cause resentment. This is not surprising. Your loyalty is being manipulated.