Scraping through the market rubble, mutual fund investors are finding, at first glance, what appear to be gems -- but savvy investors take great pains to separate diamonds in the rough from cubic zirconia before committing their hard-earned savings.

A reader named Linda spotted what looked to her like a gem: the CGM Focus Fund (CGMFX: news, chart, profile), a small-cap blend fund with an especially attractive track record, despite a loss this year.

This fund, as Linda pointed out, has been among the top performers among its peers for the past one, three and five years. "But you don't hear or see much on the fund itself," she wrote. "Is it too small? Why isn't everybody jumping on the bandwagon of this fund?"

CGM Focus is relatively small, with $421 million in assets, according to Morningstar. And its recent track record, despite a loss of 13.9 percent this year through Monday, is so impressive that Linda raises a good question: Why isn't money flooding into it?

This is always an excellent question for investors to ask themselves. If an investment seems overwhelmingly compelling yet it's not attracting buckets of money, there must be a reason. If you understand the reason, you at least understand the risk that you are subjecting yourself to.

According to Morningstar, trailing performance at CGM Focus puts the fund in the top percentile of small-cap blend funds for the trailing one, three and five-year periods.

This fund has done more than "merely" beat 99 percent of its peers. It has bested the Standard & Poor's 500 Index ($spx: news, chart, profile) by 41.8 percentage points over the past year and by 45.2 percentage points annualized over the past three years. CGM Focus beat the average small-blend fund by 42 percentage points in 2000, by 39 percentage points in 2001 and by 3.4 percentage points in the first eight months of this year.

Given that CGM Focus is a no-load fund with a reasonable expense ratio of 1.20 percent, it's no wonder Linda noticed it. Indeed, we recognized the fund immediately because it's in the "Brawn Portfolio" lineup of no-load funds that we recently reviewed for FundAdvice.com.

But before Linda dives for her checkbook, she should take a closer look to see if this fund is really appropriate for her.

Morningstar's "Snapshot" view says investors in this fund "should be prepared for huge swings in returns," thanks to heavy concentration and the fund's ability to engage in short selling of a large part of the portfolio. (Short selling involves borrowing a stock and then selling it, hoping to buy it back later at a lower price to repay the loan.)

Manager Ken Heebner often invests in fewer than 20 stocks and trades aggressively. In other words, this fund depends totally on the skill and luck of its manager.

This fund is not suitable for nervous investors, as its quarterly results show. Last year, the fund was up a stunning 47.7 percent. But most of that gain came in the fourth quarter, immediately after a third-quarter loss of 15.3 percent.

Despite its terrific showing during these discouraging times, CGM Focus is definitely not a safe harbor during all storms. The fund lost 27.2 percent in the third quarter of 1998, when the S&P 500 Index was down 10 percent.

Another warning: Investors with taxable accounts in CGM Focus also should be prepared to fork over some big checks to the Internal Revenue Service. Morningstar says the fund's estimated capital gains exposure at mid-2002 was higher than that of about two-thirds of its peers. That means this fund is most suitable for tax-sheltered accounts such as IRAs.

Statistics confirm Morningstar's statement that Heebner "trades furiously among stocks and sectors." The fund's annual portfolio turnover is 254 percent. And at the end of June, 85 percent of its portfolio was in only three industries: industrial cyclicals such as its largest holding, truck maker Thor Industries (THO: news, chart, profile); consumer durables such as Winnebago (WGO: news, chart, profile); and retailers such as Stage Stores (STGS: news, chart, profile).

It's possible, but statistically very unlikely, that Heebner's management will continue to keep this fund in the front of the small-cap blend class. However, very few fund managers beat the market by huge margins year after year after year. More likely, the subsequent performance of CGM Focus will become closer and closer to average.

If Linda had asked me whether or not she should invest in this fund, I'd tell her to do so only after she's got a properly balanced portfolio of other equity funds. Then she could consider committing up to 10 percent of her portfolio in a fund like this.

To use the analogy of a meal, aggressive funds like CGM Focus should be treated like dessert, not the main course. Dessert can be very tasty. But if it's the main thing you eat, the odds are high that you'll regret it later.