Recent headlines about mutual fund trading scandals may have left investors wondering what to do if their money is tied up in funds entangled in the mess.

A rash decision to dump the funds – run by Bank of America, Morgan Stanley, Janus, Putnam, Strong and Bank One – is probably a bad one for most investors, especially if it could invite tax penalties. But some experts say they’re concerned about the fund companies that are under scrutiny.

Morningstar Inc. recently said investors should consider selling their stakes in funds run by the four firms named by New York Attorney General Eliot Spitzer in a recent complaint filed against a hedge fund, Canary Capital.

The suggestion – involving Bank of America, Janus, Strong and Bank One funds – marked the fund tracker’s first recommendation of that sort. But some say the move may be too extreme, as Spitzer’s probe focuses on specific funds within those groups and not their parent firms.

Russ Kinnel, Morningstar’s director of fund analysis, said investors should look at fund-management techniques and ethics, and not just performance alone.

Spitzer accused some managers at Bank of America of rigging an illegal system for Canary to let it buy its Nations Funds shares late in the day, at prices that were not supposed to be available.

Spitzer also said all four fund firms allowed short-term trades that take advantage of inefficiencies in fund pricing.

While such “market timing” isn’t illegal, the fund firms had vowed to fight it, as it can hurt returns to long-term investors.

In Boston, securities regulators for Secretary of State William Galvin are probing possible timing abuses at Prudential Securities and Putnam Investments.

But Galvin hasn’t yet made public evidence of abuse – unlike Spitzer, who disclosed e-mails documenting Canary’s deals. Experts don’t advise avoiding Prudential and Putnam funds, for now.

Mercer Bullard, an investor advocate who teaches securities law at the University of Mississippi, said he’s concerned about Morgan Stanley, another firm that’s taking heat from Galvin. The National Association of Securities Dealers fined the firm $2 million for holding improper sales contests to spur brokers to pitch in-house funds.

“I would say, run as fast and as far from Morgan Stanley and Bank of America funds as you can,” Bullard said.

Newton resident Arthur Magni said the scandals have made him more cautious about mutual funds.

“Whichever fund companies are named by investigators, that would be an instant red flag,” said Magni, who said he may pull college savings for his 10-month-old daughter from a Putnam fund.

However, others urge caution.

“I know the e-mails are pretty damaging, but it still is in the allegation mode,” said Neil Bathon, president of Financial Research Corp. in Boston. “The investigation could broaden. But I suspect these are relatively limited situations that the rest of the industry is not going to be caught up in.”

Kinnel said that even if a fund firm isn’t facing accusations, it still pays to be careful.

Investors should look for firms that have short-term trading fees and use a technique known as “fair-value pricing” to keep prices as up-to-date as possible, he said.

Louis Harvey, president of Boston-based research firm Dalbar Inc., said he doesn’t believe market timing caused major losses. He said it’s not necessarily smart to pull out of the mutual funds tarnished by scandals.

But it might not hurt to avoid them in the future, he added. “Why would you want to put your money where the headlines are going to be working against you?”

Graphic: Pinned down; Some financial firms caught up in investigations

Bank of America: Several executives left and a former broker was charged criminally after the bank’s Nations Funds unit was accused by New York Attorney General Eliot Spitzer of making a deal that allowed a hedge fund to make illegal, after-hours trades of funds. Janus Capital Group, Strong Capital Management, Bank One and Bank of America: All accused by Spitzer of allowing a hedge fund to make money using “market-timing” techniques the firms’ prospectuses told investors they take steps to prevent.

Morgan Stanley: Using contests and incentives to get brokers to pitch in-house funds over outside funds sparked probes by the NASD and the Massachusetts regulators. The NASD fined the firm $2 million, while the state is pursuing civil charges.

Prudential Securities: Traders in its Boston office are being investigated for bypassing mutual fund firms’ efforts to prevent short-term trades in their funds.

Putnam Investments: The Secretary of State’s securities office is investigating whether someone at the Boston fund firm allowed market- timing.