Lipper's bottom-line results are difficult to decipher only because they are spread over such a lengthy report. But when summarized, this data should be troubling for any long-term investor who buys and holds a static mix of mutual funds outside retirement plans. Over the full 10 years:

The "gross" ARR of all mutual funds in Lipper's U.S. domestic equity category was 8.96% before management fees and expenses, loads and taxes. This was slightly below the S&P 500′s 9.34% return over the same period, as expected because of mutual fund portfolio trading costs.
However, the pre-liquidation ARR of all U.S. domestic equity funds was just 5.19% over this period. The total of management fees and expenses, loads and taxes was 3.77% per year.
Federal tax claimed 2.27% of the investor's annualized return during this decade. Management fees and expenses claimed 1.30%, and sales loads 0.20%.
The ratio of the pre-liquidation return to the gross return was just 58%. The higher the "pre-liquidation ratio," the more efficient funds are for buy-and-hold investors, after costs and taxes.
There was virtually no place for the non-qualified mutual fund investor to hide from the heavy impact of costs and taxes. With two exceptions, every Lipper long-term category produced pre-liquidation ratios below 70%. The two exceptions were S&P 500 Index funds and general municipal bond funds, both of which had pre-liquidation ratios of 81%. (See table below.)
For virtually all fund categories, pre-liquidation ratios were modestly lower than shown in the table, when no-load funds were removed from the calculation; i.e., when a professional financial advisor was involved.

Mutual Fund Efficiency by Lipper Category (1993-2002 Ranked by Pre-Liquidation Ratio
Lipper Category	Gross Return (ARR)	Pre-Liquidation Net Return	Pre-Liquidation Ratio	Annual Portfolio Turnover	Annual Tax Cost
S&P 500 Index	9.40%	7.6%	80.9%	9.0%	-1.2%
General Muni Bond	6.70%	5.4%	80.6%	80.0%	-0.1%
Small-Cap Core	11.60%	8.1%	69.7%	52.0%	-2.0%
Mid-Cap Core	10.70%	6.9%	64.9%	79.0%	-2.4%
Large-Cap Core	8.70%	5.2%	60.3%	67.0%	-2.0%
U.S. Treasury	8.50%	5.1%	59.6%	53.0%	-2.6%
Large-Cap Value	9.50%	5.7%	59.5%	54.0%	-2.3%
Mid-Cap Value	11.60%	6.9%	59.3%	65.0%	-2.7%
Small-Cap Value	9.90%	5.8%	59.0%	78.0%	-2.2%
Equity Income	9.50%	5.6%	58.4%	48.0%	-2.5%
Balanced	8.40%	4.6%	55.1%	83.0%	-2.3%
Income	8.80%	4.7%	53.1%	47.0%	-2.8%
General Bond	7.70%	4.0%	51.6%	44.0%	-2.6%
Convertible	9.50%	4.8%	50.7%	95.0%	-2.9%
Flexible Portfolio	8.10%	4.1%	50.3%	96.0%	-2.4%
International Equity	6.10%	3.1%	49.8%	60.0%	-1.5%
U.S. Govt. Bond	7.80%	3.9%	49.6%	198.0%	-2.5%
Mortgage	7.40%	3.6%	49.2%	182.0%	-2.6%
Large-Cap Growth	7.00%	3.4%	48.9%	86.0%	-2.2%
Global Equity	7.80%	3.8%	48.0%	139.0%	-2.0%
BBB-Rated Bonds	8.20%	3.8%	47.0%	247.0%	-3.0%
Mid-Cap Growth	7.50%	3.1%	41.7%	101.0%	-2.6%
Small-Cap Growth	7.20%	2.7%	38.0%	106.0%	-2.7%

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