I believe rono mentioned this a while back and I have never forgot it when it comes to chart tools:
"You can't argue with a pretty picture."
What do you use as a fund selection tool?
For me, here's the process...let's say I'm considering a new fund. I will first screen for candidates using my brokerage screen tool as well as ask for suggestions here at MFO. I avoid loaded funds and try to avoid transaction fee funds. With this list, I will take these fund choices to other fund evaluation sites such as:
Bloomberg Screening ToolFundmojoMutual Fund to ETF ConverterSmartmoneyFrom Hank:
maxfundsThe Bloomberg site has often opened my eyes to funds outside of my brokerage which often makes me wonder if I have the most comprehensive brokerage house...probably a topic in itself. Bloomberg serves as a ranking tool over various time frames...I like using the longer term options of 1,3, and 5 years.
Fundmojo "looks under the hood" of a specific fund and goes into the "why we like this fund" and "why we don't." It will also provide alternative choices and these often are CEF or EFT funds.
The Mutual Fund to ETF Converter sites does this more comprehensively giving you comparative ETF choices.
Finally, I like using Smartmoney's site. It charts your fund choice and it also has a SD (Standard Deviation) risk profile chart tool that allows you to compare your fund choice against other funds in its category. By hovering over the other squares you can quickly see the fund ticker it represents. You can also switch to that fund by clicking on that square.
Because this site can be a little confusing to use here's a quick video I put together using jing:
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Comments
Hint: At Fund Mojo after you type in a symbol, a link to the fund appears. click that link for the fund information.
Since bee already mentioned my first choice in original post, here's another good link that somebody shared at FA & which I used to use quite a bit
Max Funds http://www.maxfunds.com/
Does anyone know of a screening tool that can screen out funds with a short term redemption fee?
Are you going to be trading your funds that often? Seems like life on the FastLane
Thanks Hank...hadn't visited this site before.
Sounds like a plan...thanks again
I like the screener at Barrons.
Sorry for my delayed response, but the season is a wonderful disruptive influence to any schedule.
I do precious little mutual fund trading, and what little I do is controlled by very simplistic selection criteria that are rule based. Given my modest time commitment to the process, I offer these guidelines for what they’re worth.
For my passively managed Index choices, costs are the singular criterion. Costs not only matter greatly, they are my exclusive selection basis. That almost always directs me to Vanguard, unless in a rare instance, Vanguard does not cover the specific category I seek. The readily accessible Expense Ratio (ER) data nicely does the job. Many investment wizards conclude that cost control is the primary predictor of superior fund performance.
To guide my actively managed fund choices, I slightly expand my selection criteria, but do not abandon my cost containment commitment.
By definition, when I search for an actively managed mutual fund, I am actively seeking Alpha (excess returns). The strength of that objective dictates that any candidate fund must have, as a minimum, positive Alpha. Since I am a longer-term investor, the 3, the 5, and when available, the 10 year fund Alphas are scrutinized. These data are commonly available from fund websites like Morningstar.
Note that I added a constraint when citing the Alpha criteria. Since hiring an active fund manager is a risky event (he can underperform market returns), I search for a sufficiently high Alpha that exceeds the incremental ER increase that typically accompanies active funds. In equation format, candidate funds should have excess returns that are greater than the incremental cost of active management as measured by the ER of the fund minus the low cost of an Index equivalent (like 0,2 % annually). If the excess returns remain positive after the incremental cost adjustment, the risk-reward tradeoff is attractive.
Another consideration when assessing candidate active management is their dedication to an investment philosophy. One accessible measurement of a consistently applied portfolio construction policy is the fund’s turnover ratio. If the turnover ratio is high (like 100 % or more), the fund’s management is schizophrenic in applying its philosophy. Markets and individual holdings do not morph that quickly from a good to a bad investment opportunity. And hyperactive trading adds to the cost bill. I prefer outfits that have a turnover ratio below 50 %, and almost always eliminate funds that exceed the 100 % turnover level.
I use Morningstar to collect the requisite data. All the data I need is readily available at that site . The Morningstar tool allows for easy comparisons among candidate funds, and also against benchmarks. Other sites offer similar data and convenient operation.
I suspect most MFO members are far more sophisticated in their fund selection criteria, and deploy far more eloquent tools in the selection process. The complexity of the process must be judged in the context of the portfolio construction and timeframe. If a portfolio is actively traded, a more complex array of assessment tools is likely warranted; if the portfolio is more focused on the long-term, and is dominated by passive holdings, simpler criteria are probably adequate. Simplicity is golden.
I hope this helps.
Best Wishes and Happy New Year.