Have mutual funds become obsolete? Are they going the way of the 8-track and the VCR?

Some on Wall Street would unanimously agree. After all, the industry has taken a beating lately because of sales fees, poor performance and a few (ok, more than a few) market-timing scandals that made headlines around the world. Not to mention the explosive growth of the ETF industry in the last few years alone. Hey, who doesn't love the ability to buy or sell ETFs anytime throughout the day (not just at the closing bell) and a low expense ratio that keeps more of your own money in your pocket?

Given the obvious advantages of ETFs, one may think that the "old-fashioned" mutual fund has become obsolete. But that's hardly the case.

In fact, more than $12 trillion of cash still resides in open-end mutual funds (the kind you buy straight from the fund company itself or through a sponsor). Now, some of that money can be quite lazy or ill-invested, but certainly not all of it. Yes, if you handle them wisely, mutual funds can be a very profitable part of your portfolio.

Here are 5 do's and don'ts for the loyal mutual fund investor.

Do Pick a Time-Tested Fund Manager.

Steer your money to mangers with proven long-term track records. Now, I bet you've heard cynics say that it's nearly impossible to identify truly superior portfolio managers. That's simply not true. Here's how you can pick a portfolio manger worth his or her weight in gold: Take a look back to see how their funds performed in the "lean" years, like say, investing in the global markets back in 2000 to 2002. If he or she was able to outdistance their peers during this troubled time for internationals (as well as the recent "fat" years) then you've got a pretty good indication of true talent.

Don't Trade in and Out.

You won't make any more money in mutual funds by trying to time the market. In fact, some mutual funds actually penalize frequent traders by assessing a redemption fee on shares led less than a specified time frame (usually less than 90 or 180 days).

Few fund investors—even with the best technical tools…