Positive returns may be the one saving grace for mutual funds this year. State and federal regulators' probes of trading practices at such fund giants as Janus and Nations Funds have mired the fund biz in its worst scandal in decades, but bull markets tend to sweep a lot of nastiness under the rug. Across the board, equity funds have rallied, and bond funds have held their own despite a rise in interest rates. The average diversified U.S. stock fund is up 9.4% in the third quarter (through Sept. 19) and 24.1% this year, beating the Standard & Poor's 500-stock index's 6.7% and 19.2%, respectively. International stock funds have done even better, up 11.9% this quarter and 24.2% for the year, thanks to rallies overseas―even in the long-suffering Japanese stock market.
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