Legg Mason's Bill Miller issued a letter to shareholders last week admitting the Legg Mason Value Trust Fund, which is down nearly 9% this year, "had a dreadful second calendar quarter." But all too often, notes syndicated columnist Charles Jaffe, fund managers try to gloss over their mistakes.

Jaffe sorts through some of the language investors should be wary of, and "it's a challenging market right now" is at the top of his list, because, he says, the manager is essentially just blaming the stock market.

"We underestimated the risk" is another cop out, he says, for it is the manager's job to appropriately manage risk. The most overused phrase, he says, is "cautiously optimistic," which he calls essentially meaningless. If they manager talks about the "long view," they are merely trying to distract shareholders from recent performance.

Finally, "we're taking steps to improve returns" could be a red flag that the manager no longer believes in their investment philosophy.

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