Like you, I haven't enjoyed watching my investments take a hit over the past year. It's been both painful and disheartening. And no one is really sure how much worse it might get.

But the value investor in me is excited because blue-chips like Microsoft (NASDAQ:MSFT) are on sale for less than half their customary multiples. And there's an even greater aspect of this market drop that I am excited about ... and I'll share this with you below.

Honesty is such a lonely word
Until recently, the mutual fund industry profited from the tailwinds of the bull market that began after the tech bubble burst. As stocks went up, up, and even further up, so too did the historical returns of these funds.

This was both good and bad. Good because fund investors profited as stocks rose, but bad because these returns are typically what funds use to attract new clients.

When mutual fund companies spend millions of dollars advertising such "hot" returns -- like, for example, the $104 million T. Rowe Price (NASDAQ:TROW) spent in 2008 on promoting its funds -- they frequently attract "hot money," those speculators lured by recent performance who are eager to get in ... but also just as quick to flee.

A vicious cycle
For a case study on how disastrous this hot money can become, look no further than Legg Mason's (NYSE:LM) Bill Miller and the downfall of his fund, Legg Mason Value Trust. Year after year for more than a decade, Miller posted strong positive performance thanks to well-timed investments in big tech names like Time Warner's (NYSE:TWX) AOL and Dell (NASDAQ:DELL).

This would have been fine, had his company not touted these returns year after year, attracting this precarious hot money. But money management firms are scalable and the temptation to use this tactic is strong. Most give in. And when they do, they risk losing control of their fund.

Which is exactly what happened to Bill Miller.

After he made a few bad calls on companies like Citigroup (NYSE:C) and Yahoo! (NASDAQ:YHOO), the hot money rapidly fled. And now during the most attractive buying opportunity of his lifetime, he is plagued by investor redemptions. Rather than put excess cash to use, he's had to use it to meet investor redemptions. And rather than hold cheap stocks until they turn around, he's had to sell them to replenish this cash, leading to poorer performance and more redemptions. 

That's simply the worst possible position for Miller to be in during the conditions for which he has waited his whole career.

It's a good thing
So back to why I'm excited about this market tumble.

I think this can become a positive thing for fund investors because funds will no longer be able to hide behind a few years of strong performance in their advertising -- for most funds, the track record is so abysmal, they'd be stupid to brag about it.

Rather, if funds want to garner new clients, they'll have to advertise characteristics that are both good for investors and attract the right kind of investors. By this, I mean advertising factors like low expenses, long-tenured managers, a consistent strategy, etc., which are all positive characteristics we employ when vetting out funds to add to our Champion Funds newsletter scorecard.

For example...
One fund that meets these characteristics that we're extremely impressed with is Greenspring, and we've recommended it to Champion Funds members. It's a small fund of just over $300 million in assets under management, but it has low expenses, boasts a management team that's been in place for over two decades, and has an impressive long-term record.

When I recently visited the fund's offices, its team stressed just how much they think about attracting the right kind of clients -- those who share their long-term focus of slow and steady growth -- and how that has enabled them to achieve net inflows in 2008, all on a marketing budget of less than $25,000!

To find out more about why we like this fund and the place it could serve in your portfolio, as well as to browse through more than 60 other funds we think could merit a spot in your portfolio, click here for a completely free 30-day trial.

Fool analyst Adam J. Wiederman owns shares of Legg Mason, but of no other company mentioned above. The Motley Fool also owns shares of Legg Mason, which is an Inside Value recommendation, along with Microsoft and Dell. Greenspring is a Champion Funds selection. The Fool's optimistic disclosure policy is here.