It looks like you're new here. If you want to get involved, click one of these buttons!
how-to-use-statistical-analysis-with-mutual-fundsAll of the key statistics and quantitative measures have already been calculated. So to find and buy the best mutual funds, the primary knowledge or skill you need is to understand how to use these measures and where to find them.
Statistical analysis of mutual funds is just what it sounds like--a means of studying the quantitative aspects of a fund to help the investor gain an understanding of past performance for a clue about future results.
Yes, there is no "guarantee" of future results but investing is not about guarantees--it's about taking calculated risk.
© 2015 Mutual Fund Observer. All rights reserved.
© 2015 Mutual Fund Observer. All rights reserved. Powered by Vanilla
Comments
https://awrd.morningstar.com/SB/USAASB/USAAScreener.asp
There are actually 27,375 share classes. The 15,616 that you started with are the result of the default settings on the screener restricting results to funds that are both open and available via USAA. (Note also that many funds are counted multiple times, since they have multiple share classes.)
Curiously, M*'s premium screener has only 26425 share classes in all. I was trying to figure out how the screener defines "high" for Sharpe ratio and alpha. I'm still not sure.
A few suggestions on your screen:
- Try setting ER limit differently for different classes of funds. IMHO an ER of 0.9% is respectable for a broad domestic equity fund, a bit tight on foreign funds, and ridiculously high for a bond fund.
- brokers often have different mins than the "official" min, so often I don't screen on mins, and then check around if I find a fund of interest. The USAA-customized screener might already adjust for funds through USAA, I haven't checked.
I'm willing to let more pass through a screener and then do some legwork than be too aggressive in screening out potential candidates.
Given that the past five years the market has only gone up, screening for low beta and top quartile performance may be too aggressive. Almost by definition in a market going straight up, the best performers will be the ones with higher beta (since they'll tend to do x times as well as the market, where x is the beta).
In this kind of market, lots of good funds will be eliminated because they're not both consistent top performers and low beta. More than likely the funds that pass these two screens will have a moderately low R^2, meaning that the beta is relatively useless.
NASDAQ funds have high betas, so I'm not sure how you coaxed them through the screener. USNQX has a beta of 1.19 (vs. S&P 500), and NASDX has a beta of 1.18.
I believe the to NASDQ funds are considered low beta for their category (Large Growth). I am assuming S&P 500 is Large Blend. I like your suggestions with ER, I'll add that to my screening tasks.
Your link to the M*screener locked me out, try this one if you'd like to use the USAA M* Marketplace screener:
morningstar.USAAScreener
@davidmoran,
List seems sort of like seeing a long forgotten "hot" old girlfriend at a class reunion...acknowledgement and regret at the same time. Never too late.
very good
I think you're conflating two different concepts: comparison within category and comparison with a benchmark.
Unlike ER, beta does not exist in a vacuum. It is a measure of excess return (generally defined as return above 3 month Treasuries) relative to the market or relative to some other benchmark.
Once you have computed those betas for LCG, you can compare them to identify the low ones relative to the category.
I used M*'s premium screener to coax out the average beta for LCG. It's 1.03. The screener verified that the NASAQ index funds mentioned do have the high betas I described.
M*'s help for its screener describes beta here:
http://screen.morningstar.com/AdvFunds/data_definition.html?field=Beta+(3+Year)
I spot checked a bond fund in the final 18, and found the same problem with beta. For bonds, M* uses US Aggregate Bond Index as the benchmark. Relative to that benchmark, ACCHX came in with a 1.25 beta, vs. 1.14 category average for corporate bonds.
A good example of why beta may not be meaningful is FATRX. Since short term bond funds are bond funds, M* uses the same US Aggregate Bond index as a benchmark to compute beta. But these bonds on average have R^2 of 54, making the figures worthless. FATRX's beta is even less meaningful, with an R^2 of 46. With all that said, FATRX's (meaningless) beta of 0.49 is much higher than the category's average (and meaningless) beta of 0.29.
If the screener is looking at absolute betas (i.e. not relative to a fund's peers), then I could see it selecting FATRX. But if the screener is searching for funds with betas low relative to peers, then FATRX should not have popped out.
FWIW, when I use the USAA screener with just four criteria, I get 65 funds, including only one of the ones in your list:
- Open to new investors
- Available as USAA
- ER <= 0.9
- Beta = low
I get AB Corporate Income (ACISX), not AB High Income (AGDKX, AGDYX). But ACISX has an above average beta also. That suggests a flaky screener.
I do get Oppenheimer Rochester AMT Free NY Muni (ONYYX) which is in your list, but not any other Oppenheimer fund, not RMUYX and not ORNYX
I will be traveling next week...I hope I do not get the same "flaky screener" at the airport.
Thanks for the further explanation on beta.
Do you have favorite screening tool...maybe MFO's?
I've got T. Rowe Price to thank for this freebie. (Many years ago, T. Rowe Price was the only place that offered free individual 401(k) accounts that included a Roth option. That's what drew me into them.)