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Even now, Markman won't concede that the essential points of his book are flawed, like so much else born of the technology bubble. "Clearly, the timing of the book was inopportune," he says. "But a lot of the book still applies." He now says, however, that stocks of large, undervalued companies can also make good investments.

Markman launched his four "funds of funds" -- that is, funds that invest in other funds -- in 1995. He claimed his expertise would more than make up for the 0.95 percent annual expenses the funds imposed above and beyond the expenses of the funds he purchased. As it turned out, 1999 was the last year that Markman's two most aggressive funds managed to do better than Standard & Poor's 500-stock index. Over its last five years, the Markman Aggressive Allocation fund trailed the S&P 500 by an annualized nine percentage points, and Markman Moderate Allocation fund trailed the index by an annualized seven percentage points. That made Markman, who had bet he'd beat the index, the loser of a much-publicized wager with the Vanguard Group's founder and indexing advocate, John Bogle.

At the end of last year Markman folded his funds into a new entity, Markman Total Return. For the new fund, Markman invests not only in funds, but also in stocks and exchange-traded funds (ETFs). Despite his protests, the SEC has ordered him to list the sorry record of his defunct Moderate Allocation fund as past performance for Total Return.

THREE BAD IDEAS

Like Markman, Paul Merriman, 59, is an affable, intelligent man with some provocative notions about investing. But his Merriman Leveraged Growth fund is a recipe for trouble, combining market timing and leverage (investing with borrowed money) with outrageously high expenses -- a proven loser. But the fund's performance, though lousy, doesn't sink to the level of the Hall of Shame. It's the other three practices that push this fund into our house of horrors.

The Seattle-based Merriman carries to the extreme the notion that you shouldn't put all your eggs in one basket. As a result, he has created a fund that has delivered inferior performance in bull and bear markets alike. When fully invested, the fund can own as many as 35 other funds, including a big helping of foreign funds. Merriman employs trend-following timing systems for funds that invest in large stocks, small stocks, growth stocks, value stocks, foreign stocks and industry sectors. When he's bearish, he may go entirely to cash. When he's bullish, he may be as much as 150% invested in stock funds, through the use of borrowed money. When he's bullish on a sector, he puts his money in a fund in that sector with recent top performance.

This approach delivered 14 percent losses for three consecutive years. But it also badly trailed its peers and the S&P 500 during the halcyon years of the 1990s. Concedes Merriman, who manages $300 million using a variety of strategies, "If this [running Leveraged Growth] were the only thing we did for a living, we wouldn't manage much money." Despite the fund's failures, he argues that it is well-suited for young investors who can afford to invest aggressively.

Shareholders paid 2.26 percent last year in expenses, including 0.26 percent in interest costs on borrowed money. And that doesn't count another 1 percent to 1.5 percent in expenses on the underlying funds. Merriman's Web site rubs salt in the wounds of his investors by boasting of "an automatic mechanism that attempts to avoid or reduce the losses involved in the 20 percent-to-40 percent market declines that are a normal part of buy-and-hold investing." That is the system that caused Leveraged Growth to tumble 44 percent from peak to trough.