It was a dreadful year for stock funds, but at least the tough times showed why those highly paid, gunslinger managers earned their sky-high salaries, right? "It's common wisdom that active managers have the ability to avoid the falling knives," says Morningstar analyst Dan Culloton. "But they really didn't last year." He notes that passively managed funds that track stock indexes beat their active brethren in 10 of 18 Morningstar categories. An alternative might have been to stay on the sidelines, but "investors go nuts when their funds hold lots of cash," says Josh Weiss of the No-Load Fund Analyst newsletter.

Well, maybe not last year when a powerful year-end rally couldn't save stock funds from their first back-to-back losing years since 1973-74. Despite a 14.3 percent fourth-quarter comeback, the average domestic fund fell 11.3 percent, with large-cap growth (-23.5 percent), communications (-35.3 percent), and technology (-38.1 percent) faring the worst. About the only bright spots were midcap and small-cap value funds (up 6.4 percent and 17.4 percent, respectively) and real-estate funds (up 8.9 percent). Usual havens like healthcare (-13.1 percent) and natural resources (-11.3) weren't. Taxable bond funds were a better bet for safety, gaining 5.5 percent on average.

What about 2002? Three consecutive down years are rarer than a Wall Street analyst issuing a "sell" rating. There's a good chance your fund will be back in the black, though few analysts expect the double-digit gains so common in the late '90s. Stocks have already rallied in anticipation of a rebound. Most stock funds do well as the economy strengthens, so perhaps your fund manager won't be the only one earning big bucks this year.

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