Buying into a mutual fund is supposed to be about peace of mind and simplicity. You send over that initial investment and let financial minds grow it from there. No worries. You go about your daily tasks, carefree, only to hit the pillow at night for your well-earned sleep. But those bed bugs, man. They bite.

From the moving hassles within a consolidating sector to the alarmingly high turnover rate caused by defecting money managers, that rest was denied. Mutual fund owners suddenly found themselves consuming daily NAV prices the way stockholders absorbed tickers and skimming fund quarterly reports and prospectuses the way analysts go through 10-Q filings. They had to keep tabs on fluctuating expense ratios and the annual taxable implications despite their passive participation. Slumber? Bah! Having someone manage your money often proved to be more taxing than rolling your own.

But, apparently, even that wasn't enough.

Canary in a gold mine
The sky started falling two months ago. That was when New York Attorney General Eliot Spitzer accused hedge fund Canary Capital and several mutual fund companies of market timing and late trading.

The fact that a hedge fund would hope to make millions by looking to buy into mutual funds that owned after-market gainers at market close prices should not come as a surprise. The fact that it was recognized fund families like Janus (NYSE:JNS), Strong, and BankOne (NYSE:ONE) that supposedly cheated their fund investors out of countless millions by playing along is what's truly incomprehensible. How could the same investment specialists that dissuaded individual investors from market timing be bribed into bending the rules for institutional players? Like Janus' signature mythological mascot, it was a two-faced move.

At the time, our own Bill Mann was on the mark when he pointed out that this was probably only the tip of the iceberg. In recent weeks, industry watchers looking for the other shoe to drop have backed into an avalanche in Imelda Marcos' footwear closet. The list continues to grow. Earlier this week, Wachovia's (NYSE:WB) majority-owned Prudential Securities became the latest company to be charged with dealing fund holders a piece of the crock. Poor Wachovia. First Union acquired the smaller bank to assume its cleaner name and now it has soiled those duds, too.

But it's not as if you should feel sorry for the companies that ultimately wind up guilty of stuffing sawdust into the sausage casings. Even after paying back their defrauded investors, their debt will be nowhere close to being paid off. Investors and 401(k) plans are bailing out and rightfully so.

So what do you do if you are the black sheep in the mutual fund family? I can see many of the tainted players scrambling to merge with cleaner funds, changing names in the process. Who do you think will get first dibs on being renamed Altria Investments? Hmmm? It looks good and earns an early alphabetical listing in the paper, too, no?

In the NAV
Mutual fund investors have some decisions to make between the sheep being counted tonight. They can become entrepreneurs and start pumping out "Wronged by Strong" T-shirts and "Pruned-ential" bumper stickers. They can stay put, assuming that the damage is done and that appropriate policing will keep this from happening again, even if it means condoning the actions of the likely perps. Or, they can take matters into their own hands and learn to manage their own money.

Let me take a break from the "Punt Putnam" iron-on press to suggest that mutual fund investors consider that last alternative. While it's clearly not for everyone, at least you will know -- win or lose -- that any bonehead decisions were ultimately your own.

You don't have to swear off mutual funds. And if you have a broker who uses these sad events to work the churn by triggering redemption fees and moving you into ridiculous load funds, don't add insult to injury. However, can you think of a better time than now to cough up the cod and learn how to fish?

Our Mutual Funds Center helps you to fish for the funds that break the mold, so stop by sometime.

Rick Aristotle Munarriz remembers the day, nearly a dozen years ago, when he sold off the last of his Janus Venture and 20th Century Ultra funds to buy into the market directly. He hasn't sworn off mutual funds entirely. Right now, the only fund he is invested in is Merger Fund, which he is using as an aggressive resting place for his idle cash. Rick's stock holdings can be viewed online, as can the Fool's disclosure policy.