You may have wondered why your mutual funds have been going down for the past 2 years. The answer is very simple, but not one you will hear from Wall Street as they want you to send money.

In order for stock mutual funds to go up you must have a bull market. Unfortunately, that bull ended 2 years ago and is probably not going to return for a long time. Yes, there will be short-term rallies that can last from weeks to months, but the downward spiral will continue. For the past 100 years the Price/Earnings ratio of the S&P500 index has a mean average of about 15. With the current P/E running about 41 the rubber band has been stretched too far and is now contracting toward a more realistic level. It will take a time, probably several years, for a true bottom to be reached.

Mutual fund charters require the fund manager to be fully invested at all times. The fund may be required to be invested in tech stocks, pharmaceuticals, automotive, Asia or some other specific category. If that particular sector is weak and almost all stocks therein are headed down the fund manager has nothing to buy and is not allowed to sell to put the money in cash or bonds to protect the investors. Some are allowed to buy and sell what they wish; others must invest in stocks of a particular index such as the Dow Jones, S&P 500 or the Nasdaq. Most of the fund managers today are too young to have experienced a bear market and do not know how or what to do.

The small investor today has been taught to believe that the stock market always goes up. From 1982 to 2000 it did, but that was the end. All the talking heads on radio and TV have been telling you to buy the breaks and that the market always comes back - except when it doesn't. Almost none of them has ever seen or even studied a major bear market. The last one was 1973-74 just about the time most of these guys were in grade school or high school. They haven't a clue and don't know when or how to sell.

Today there are trillions of dollars in 401Ks, IRAs, pension plans, etc. run by professional fund managers, financial planners, bankers, etc. who have no idea how to protect their investors. More trillions are getting ready to go down the drain. Last year 90% of stock mutual funds lost money. The Grim Reaper is now the manager of your mutual fund.

For the little guy, that's you, there is only one way to protect your money. If you are in one of those plans you can tell them you want to have your funds in a money market account. At least it won't go down. If there are any fixed income or bond funds available to your account that is another safe venue.

Mutual funds are no longer a good long-term investment. The age of the stock mutual fund is over. Dead. Don't let your hard-earned money get away.