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Mutual Funds

Don't Fall For This Top Fund

A move into cash put Reynolds Blue Chip Growth at the top of the charts.

The familiar caveat that past performance is not necessarily an indication of future performance appears on page 3 of the prospectus for Reynolds Blue Chip Growth. But that disclaimer so aptly sums up Reynolds's inconsistent record that management could have incorporated it into the name of the fund itself.

Reynolds is at the top of the charts because manager Fritz Reynolds piled 100% of assets into cash in early 2008. So why is the fund still in the red? Reynolds decided in October to move 50% of assets back into stocks, only to rethink that move two weeks later and sell everything. Those seesaw transactions, plus the fund's high, 2% expense ratio, account for the bite.

The fund's moves exemplify the perils of market timing: No one can do it well consistently. Reynolds moved to a large cash position partway through the 2000Ð02 bear market, too, but that didn't prevent the fund from losing 77%, or 30 percentage points more than the Standard & Poor's 500-stock index, over the course of the market's fall.

It's not merely the moves into cash that should give investors pause. Although the fund enjoyed a terrific run-up on the way into the dot-com bust -- returning 39% annualized from 1995 through 1999ÑReynolds never found his mojo again after the fall. He can't explain, for example, how his fund lost money in 2004 and 2005 -- years when the broad market delivered positive returns. So don't be wowed by this one-year wonder. Next year's record may not be such a hit.