ran a story today about Vanguard Group founder and general index fund god John Bogle, saying the decline in the stock market could mean thousands of U.S. mutual funds will close.

Despite an August rally in which the S&P 500 rose 5.6%, from March 2000 to July 2002, the U.S. stock market's total market capitalization declined by $3.7 trillion. That kind of evaporation could claim the livelihoods of fund managers in as many as half of the industry's equity funds. While you probably don't care whether the suits keep their day jobs, you may be concerned about money you've entrusted to mutual funds.

Most funds are part of a larger family, which means if your mutual fund is closed, the parent company moves your money to another fund in its stable. Fund consolidation is the name of the game, rather than bankruptcy. The larger issue for most people is knowing where your money is and how it's doing against the market averages.

According to the Investment Company Institute, the number of U.S. funds since 1990 has rocketed from 3,679 to 8,325, with assets under management rising from $1.1 trillion to a peak of $7.3 trillion, when the S&P 500 reached its high of 1,527 in March 2000.

The bull market attracted a ton of money -- and new investors -- into the U.S. stock market. Unfortunately, even during a time when monkeys throwing darts seemed to be an effective stock-picking technique, managed mutual funds lagged in performance. U.S. stock funds garnered annual returns of 10.8% during the 1990s, according to the Investment Company Institute. That compared with the S&P's 18% average annual gain.

The moral of the story: While you probably don't have to worry about battling for your money in bankruptcy court, should your fund be closed, you do need to worry about paying higher fees in managed funds, only to lose to a cheaper, passive market index. You still need to compete against the total market index fund or the S&P 500 index fund -- whether we're in a bear market or not. If you can't beat 'em, join 'em.

Have friends worried about their mutual funds? Email this article to them using the link below.