It's not exactly news, but there is a serious crisis of confidence in Wall Street.

You might think that would be ending, what with the recent rally, but after watching millions of dollars of wealth vanish, seemingly overnight, and enduring tales of outright fraud (thanks, Bernie Madoff!), investors are still skittish.

The investment gurus let them down big time, and, at least in some quarters, that apparent breech of trust is coming at a high cost to some money managers.

Thanks, but no thanks
A recent Wall Street Journal article noted that several formerly high-flying funds are having difficulty attracting assets into their folds, despite making tremendous comebacks this year.

Fidelity Magellan (FMAGX) lost 49% of its value last year, but has already recovered 46% this year, thanks in part to strong performance from top holdings like Corning Inc. (NYSE:GLW) and Applied Materials (NASDAQ:AMAT).

Dodge & Cox International Stock (DODFX) was down 47%, but is up 42% year to date, boosted by hefty returns from energy companies Schlumberger (NYSE:SLB) and Petrobras (NYSE:PBR).

But despite the funds' impressive rebound this year, investors have been in a less than forgiving mood. Through midyear, investors had yanked $790 million out of International Stock, while Magellan has seen outflows topping $1.5 billion through August.

Apparently, many folks are throwing in the towel on actively managed funds and switching to low-cost exchange-traded funds, figuring that if they're paying for expert money management advice, they should have gotten more downside protection from the financial crisis than they did.

Regaining trust
Investors are right to cast a wary eye on Wall Street and most of the mutual fund business, since retail investors and shareholders are often last on the list of company management and fund shop concerns.

Unfortunately, there's still no better way to achieve long-term wealth than by investing in the stock market -- so odds are good that we investors will have to try to find a way to make the game work for us.

First of all, ditching an underperforming manager can be a good idea -- but not if you can't see the long-term forest for the short-term trees. Even the best managers and investment gurus will get it wrong from time to time and have a bad year (or three!). Don't give up on a solid, long-term performer because of a short-term setback.

Exchange-traded funds and index funds are the perfect low-cost substitutes for active funds if you're leery of coughing up extra money for questionable actively managed funds. Just make sure you stick to broad-market, well-diversified ETFs like Spiders or PowerShares QQQ that invest in a wide variety of big-name stocks like Microsoft (NASDAQ:MSFT), Google (NASDAQ:GOOG), and Oracle (NASDAQ:ORCL).

Stay away from narrowly focused funds, which are typically much more expensive and won't provide broad coverage.

Finally, while it's easy to paint the entire mutual fund industry with a negative brush, there still are some truly talented, value-adding managers. Most mutual funds won't beat the market over time, but if you can identify those rare individuals who have proven long-term market-beating ability, you'll be able to vault your portfolio beyond a simple track-the-market return.

If you want a peek at some of the talented managers we believe will be beating the market long term, check out the Fool's Rule Your Retirement investment service. With your free 30-day trial, you'll not only get the latest financial planning and retirement advice, but you'll also get the inside scoop on some of the top mutual funds in the business.

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Amanda Kish is the Fool's resident fund advisor for the Rule Your Retirement newsletter. Amanda owns shares of Dodge & Cox International Stock. Google is a Motley Fool Rule Breakers choice. Microsoft is an Inside Value recommendation. Petrobras is an Income Investor pick. The Motley Fool owns shares of Oracle. Click here to find out more about the Fool's disclosure policy.