If your fund is slipping behind the benchmark, you will want to pay careful attention to what the portfolio manager has to say about it in the annual report. You are entitled to a candid appraisal of the market and an explanation of why the fund performed as it did. "These are tough times," is not adequate. You will also want to see what the portfolio manager plans to do going forward and when he expects a change in performance.

Look, too, at the financial highlight table to see the expense ratio and the portfolio turnover rate for the past five years. Ideally, the expense ratio should be trending down. A portfolio turnover rate of 30 to 40 percent is low; 50 to 60 percent is average and 100 percent or more is high. That means the manager is turning over the entire portfolio each year.

Check, too, to see what is in the fund's portfolio. The annual report will list all the holdings as well as the percentage allocated to different industry sectors.

Finally, look at the table that provides year-by-year performance going back 20 years, which you may not be able to find anywhere else. You should be looking here for consistency.