Of the more than 8,000 mutual funds in existence today, only a handful are worthy of consideration for serious money. The majority of mutual funds are style-box-conscious, benchmark-hugging closet index funds masquerading as something unique. The end game for most funds is to gather assets. Portfolio managers are compensated for asset gathering, not investment performance. Active management for most fund groups is really just tinkering with benchmark weightings. Fund companies push this refuse on unsuspecting individual investors by bribing the armies of brokers and salesmen with performance-destroying front-end sales loads and 12b-1 marketing scabs. Funds that offer a truly compelling reason to invest are rare, and many of the worthy are now closed to new investors. Those that remain open will not stay open indefinitely.

For investors of means, the obvious choice for unique/exclusive portfolio management is a boutique-registered investment advisory firm. Look for firms that charge less than 1% and manage assets across a broad spectrum of securities, emphasizing individual stocks. Don't fall for the style-box-conscious CFP pitch, either. This crowd will set you up with the no-load versions of funds sold by the hucksters at brokerage firms and insurance companies. You do not want to pay a management fee for investment advice that calls for investment in a group of benchmark-hugging closet index funds that blanket the style box.

As I have written in the past, I expect the ETF industry to hollow out the mutual fund industry. ETFs have caught on in a big way. More ETFs were unveiled in 2006 than in all previous years.

ETFs offer many compelling advantages over the closet index funds sold to individual investors. Convenience for ETFs is a biggie. You can buy and sell ETFs from any brokerage account anytime the market is open. Mutual funds, on the other hand, are priced once per day and available only on select brokerage platforms. If the fund you want to buy is not available on your broker's platform, your only option is to send money directly to the fund company, creating an onerous paperwork nightmare for yourself. You also don't have to worry about your ETFs closing. And ETF sponsors are not concerned with fund flows.