What if I told you about a fund that, since its inception in 1963, has racked up an annualized gain in excess of 18% through the end of August? On average, this particular fund has delivered its fat return for some 42 years. Moreover, while the typical domestic-stock mutual fund will ding you roughly 1.4% for the "privilege" of investing in it, this one costs less than half that amount, weighing in with an expense ratio of just 0.63%.

That's an enormous competitive advantage, of course. A fund's expense ratio represents the amount of your assets the fund company takes back each year in exchange for its services. All things being equal, then, the lower the expense ratio the better. Indeed, a low price tag not only gives the fund's manager a leg up on his costlier rivals, it also helps him stay within earshot of his expense-free benchmark. (This fund's benchmark is the S&P 500.)

That said, all things aren't equal when it comes to making intelligent fund investment decisions -- a point I make early and often in my role as lead analyst of the Motley Fool Champion Funds newsletter service. Among other things, managerial tenure -- i.e., how long the stock-picker-in-chief has been at the helm -- is an important consideration. And yep, this mystery fund has experience in spades, boasting a leader who has been at the controls for nearly 10 years -- more that twice the length of service of his typical rival.

So far so good, but ...
Here's where the story of this fund -- and I'll go ahead and let the cat out of the bag: it's Fidelity Magellan (FMAGX) -- takes a turn for the worse.

Remember that terrific track record I told you about? Well, much of that owes to the fund's previous managers, a venerable group that includes the legendary Peter Lynch, who piloted the fund between 1977 and 1990 and racked up outsized returns during his time in office.

Indeed, during that reign, Magellan was lithe, nimble, and could traverse any area of the market's terrain in search of what Lynch -- a real-deal investment luminary -- likes to call "10-baggers." Now, with a bloated asset base of more than $52 billion, the fund is consigned to lumber along in search of the market's biggest boys. At the end of June 2005, Magellan's top 10 holdings looked like the VIP list at a blue-chip party: Microsoft (NASDAQ:MSFT), ExxonMobil (NYSE:XOM), Intel (NASDAQ:INTC), and Johnson & Johnson (NYSE:JNJ) were all near the front of its pack.

Is that so wrong?
There's nothing necessarily wrong with that -- indeed, some market mavens will even tell you that, these days, the best bargains are to be found among mega-caps stocks. Still, why pay up for a fund that has essentially become an index tracker, which is precisely what Magellan has become? All of the aforementioned stocks are well-represented in such passively managed picks as Vanguard Total Stock Market (FUND:VTSMX) and Vanguard 500 Index (FUND:VFINX), after all, and those two stalwarts will cost you just 0.19% and 0.18%, respectively. So much, then, for Magellan's "low" price tag.

But wait
Don't get me wrong: I'm a big fan of top-notch actively managed funds. That's the primary focus of Champion Funds, after all, and so far the recommendations I've offered subscribers are beating the market by more than 7.5 percentage points. The newsletter is focused on the long term, of course, and I expect more of the same kind of outperformance over the next three to five years and beyond.

And why wouldn't I? The funds that get the newsletter's nod are the cream of the money management industry's crop; the picks have seasoned management, reasonable price tags, and track records of beating up on the market.

The Foolish bottom line
Unfortunately, the now-closed Magellan doesn't make the cut. Despite an R-Squared score of 99, the fund actually lagged the S&P 500 by some 2.7 annualized percentage points for the three years that ended with August.

What's that? Don't speak fund geek? OK, here's the translation: Virtually all of Magellan's performance over that stretch of time can be explained by movements in the S&P. And to the extent that the fund has deviated from its bogey, its small bets haven't panned out.

Taken together, then, all the above makes a seemingly attractive fund like Magellan much more of a dud than a stud. That said, the fund industry boasts many more of the latter type than you might imagine. Indeed, if you'd like to see a cherry-picked list of more than 30 of 'em, just click here for a risk-free 30-day trial of Champion Funds.

Shannon Zimmerman is the lead analyst for Champion Funds and owns shares of Vanguard Total Stock Market. The Fool has a strict disclosure policy, which you can read all about by clicking right here.