NEW YORK (CNN/Money) - There is no doubt investors lost money because some fund families engaged in improper and illegal trading. But the cleanup is likely to cost them a lot more.

Scores of mutual funds have been implicated in the widening probe started by New York State Attorney General Eliot Spitzer and expanded by federal and other state regulators. A number of fund managers have already been forced out of their jobs and, chances are, more will follow. Individual investors caught in the middle will likely pay the price.

"It's possible that the downstream costs will be more than the actual cost of wrongdoing," said Don Kassidy, senior analyst at fund tracker Lipper.

Market timing and late trading -- the rogue practices funds are accused of having allowed -- did cause damage to long-term investors that can be calculated and is unlikely to amount to more than 2 percent in annual returns. In many cases it will be less than 1 percent, and the fund companies have pledged to restore the money to investors. But the damage caused by massive redemptions, lower future returns and a widespread loss of confidence in the mutual fund industry is likely to be a lot higher and impossible to measure.

At Putnam, the nation's fifth-largest mutual fund group, two of the managers already ousted -- Justin Scott and Omid Kamshad -- were also two of the best performers. Kamshad was in charge of Putnam's international group, "the one standout area" at the firm, according to Russell Kinnel, Morningstar's director of fund analysts.

When a star manager who has steered a mutual fund to solid returns for years leaves, regardless of the reason why, returns are bound to suffer, at least in the short term. When Garrett Van Wagoner left the Govett Smaller Companies fund at the end of 1995, returns plunged from an average annual 51 percent during his tenure to an average of less than 4 percent in the years until 2000, when the fund was merged into another one, according to Morningstar.

"If your fund changes managers, that's a red flag to pull your money," said Rick Applegate, certified financial planner and president of First Commonwealth Financial Advisors.

What's more, the manager's departure will likely trigger a series of redemptions by investors whose main reason for putting their money in the fund was his track record. This, in turn, is likely to result in higher costs (the cost of running the fund stays the same, but fewer people are covering it, so each pays more), tax charges and reduced investing flexibility for the new management because of the smaller pool of money and the cash that needs to be raised to meet the redemptions.

But what if that manager gave some investors preferential treatment and let hedge funds trade in his fund's shares at the closing price after the market close? Worse, what if the manager himself engaged in market timing of the funds he was in charge of?

"The cost to investors from the actual violations is negligible," said David Marder, a former Securities and Exchange Commission lawyer now a partner at the Boston law firm of Robins, Kaplan, Miller and Ciresi. "What's a lot more scary is people are starting to panic and pull money out of funds. That causes managers to sell stocks to cover the redemptions. This hurts the funds' returns and increases transaction costs."

In some cases, discovery of wrongdoing may result in severe damage to the reputation of an entire fund family, leading investors to avoid it and those already invested to sell. Although only four of a total of more than 100 Puntam mutual funds have been implicated in the market-timing probe, investors already pulled $4.4 billion from mutual funds managed by Putnam Investments in the single week after securities fraud charges were filed against the company. Putnam manages about $175 billion in its mutual funds.

The fund scandal is only the latest to have rattled through the investment industry. But after dealing with crooked analysts (think Blodget and Grubman), crooked managements (think Enron and WorldCom) and outrageously overpaid Wall Street fat cats (think Grasso), it may take a lot less these days for investors to act quickly and bail out of investments they find questionable.

"All this fury about what is going on in the funds has created a bit of a mob mentality," Applegate said. "People have no patience anymore and they will pull their money out. They may bite off their nose and think they're saving their face."

What he and other financial planners advise is for investors to think more than twice before selling and especially before buying new funds. Things to keep in mind include redemption costs, tax charges, the costs of moving money into a new fund. These costs will often be a lot higher than the 2 percent investors may have lost from market timing and late trading.

"The silver lining in all this is that it's getting people to evaluate who's giving them advice and what's in their portfolio," said Gary Shatsky, president of New York-based Independent Financial Counselors.