NEW YORK (CNN/Money) - In a perfect world, your mutual fund would tell you what it owns and what it costs. You'd know if it was stretching the truth with its track record. And, for good measure, you'd know exactly how much Uncle Sam gets every year.

Fat chance.

The mutual fund industry is loaded with facts and figures that are harder to track down than a tech fund in the black. If you don't know what to look for, then you might not realize what you're really earning (or losing). Worse yet, your portfolio may become horribly off-kilter on the diversification scales. In the end, your savings could suffer.

Consider these five dark secrets of the fund industry -- and how you can spot them in your portfolio.

Mutual funds are a lot more expensive than you think. It's like buying a Ford and paying the upkeep of a Jaguar.

The cheapest option is an index fund, such as Vanguard 500 index at a bargain price of 0.18 percent, or Schwab Total Stock Market Index, at 0.4 percent. At the other extreme, funds with a small asset base often come at a steep price. For example, Ameritor Investment, which has around $1 million in assets, charges 8.83 percent a year.

Many other funds fall in the 2 to 3 percent range, such as AIM Opportunities III, at 2.88 percent, or American Eagle Twenty, at 3 percent. In general, specialty funds that invest in niche sectors such as tech, small caps or international equities will charge more. Funds with a sales charge -- called a "load" in fund parlance -- also have a higher expense ratio on average, according to Peter Di Teresa, an analyst at Morningstar.

One percent here, one percent there. Might not seem like a lot. But even one percentage point takes its toll over time. Consider this example from Vanguard Group. Let's say you invest $25,000 in Fund A, which has an expense ratio of 1.3 percent, and $25,000 in Fund B, which costs just 0.3 percent. Assume an 8 percent return, and in 20 years Fund A has earned $89,997 while Fund B has netted $109,740. The difference? Twenty years of higher expense has cost you nearly $20,000 in Fund A.

Imagine how much more it would cost you if you're paying an extra 2 or 3 percentage points more. And with the average domestic stock fund down nearly 19 percent this year through Aug. 9, costs matter even more.

Your manager also can add to your costs, depending on how often he buys and sells stocks -- called the turnover rate. The average U.S. diversified stock fund has a turnover rate of 107 percent, meaning the fund manager is changing the entire lineup ever year, and then some.

At the higher end, PBHG Large Cap Value has a turnover rate of 1,185 percent, according to Morningstar. (No, that's not a typo. The fund owns about 60 names and may have tried to rejigger its lineup amid the volatility in the past year.) But the vast majority of U.S. diversified stock funds are in the middle-double digit range, such as Fidelity Growth & Income, with a turnover of 46 percent. At the other extreme are indexers, which can have little or no turnover in a year.

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Trading costs can be even more than the expense ratio, adding anywhere from 0.5 percent to 1.5 percent a year, said Mercer Bullard, founder of Fund Democracy, a group that fights for shareholder rights. It's not uncommon to see broker fees of as much as 3 percent a year, he said.

Part of the problem is that the SEC doesn't require funds to tell you what they spend on trading costs. In some cases, you can dig it out of a fund's annual financial statement. But don't try looking in the prospectus or the semiannual report. Many funds will flat out say it's none of your business.

There's more. When your fund sells a stock for a profit, it will pass along to you a capital gains bill. (By law it has to distribute gains to shareholders every year.) If it's a short-term gain of a year or less, you'll pay income tax rates that go as high as 39.1 percent. A long-term gain of more than a year gets zapped at 20 percent. Even when a fund is losing money, you can end up with a tax tab if the fund sells a stock for a gain and has a big profit on it.

An August study by Lipper showed just how much the taxman can sting. Fund investors in the higher income tax brackets have lost nearly one-quarter of their returns to taxes in the past decade. On the stock side, they've paid an extra 2.5 percentage points every year to Uncle Sam, while on the bond side, they've given up 1.3 percentage points. Funds passed along $412.8 billion in income and capital gains in 2000, which accounts for an estimated $31.3 billion in taxes.

In December the SEC began requiring funds to report after-tax data in their prospectuses, but the fund data services, such as Morningstar and Lipper, report pre-tax returns.

The SEC has warned investors to be careful when reading mutual-fund ads bragging about strong returns. The ads often do not tell the real story -- that fees, taxes, a change in management and many other factors can affect performance. And the current rules that govern fund ads have loopholes you could drive a truck through.

For example, a fund company must cite returns through the previous quarter. That means if Fund A places an ad in a magazine now, it will cite data through June 30, even if the ad is running in October, said Roy Weitz, founder of fundalarm.com, a Web site that tracks mutual funds. If the market keeps dropping between June and October, those numbers might seem overly positive.

The rules gave funds even more leeway in early 2000. The market was already sliding into bearish mode but funds were still touting rosy returns as of Dec. 31, 1999 -- when the bull market was in full swing.

The SEC recently proposed a rule change that would require fund ads to say that current returns may be much lower or higher. Ads would also have to make clearer the fees and expenses, among other changes.

The fund industry has been calling for more corporate disclosure on a range of issues, from accounting standards to earnings releases. But the fund companies themselves have dug in their heels about improving their own disclosure rules.

The SEC requires funds to report their holdings every six months, and they have two months to file the information, so by the time it becomes available it is already horribly dated. The Investment Company Institute, the fund industry's trade group, argues that greater disclosure would hurt shareholders because other investors would try to copy a fund's investing strategy.

Hogwash, say Bullard and Weitz.

"It's a bogus argument," Weitz said. "The truth is fund companies don't want people second-guessing them. They don't want people to know what they're doing."

More disclosure would tell investors whether they are diversified enough. They may not realize that they own two funds with the same top holdings. Or, they may think they own a mid-cap fund when in fact the fund is loading up on large-capitalization names. If a fund doesn't stick to its investing style -- and in a down market, plenty of managers stretch their universe -- then you have no way of knowing what the fund really owns until months later. Funds also can get away with "window dressing," when they dump losers or buy winners at the end of a reporting period to make themselves look better.

"It's appalling how unresponsive the fund industry has been addressing this issue," Bullard said.