With the new year comes a new slew of "top funds right now"
stories, surrounded by fresh fund-performance ads. But those funds aren't necessarily right for you. Fund screeners and other online funds tools can help you create a portfolio that is.
Let's start off with fund screens. Like stock screens, fund screens are database mining tools that sift through reams of financial data, then cough up a list of funds that meet your criteria. You simply list what you want or don't want in a fund. Do you want a broadly diversified fund with a slow and steady growth rate? Should the fund's manager have a lengthy tenure? Or would you prefer an aggressive newcomer with a two-year killer track record? What's more important to you, consistent gains over the past 10 years, or the fund's performance during the 2000 bear market? And how large should the fund be: $1 billion, $500 million or really tiny?
Answering questions like these can prove even more valuable to you than the list of funds you get from screening. The questions themselves force you to define a set of rules -- a strategy, if you will -- for your mutual fund portfolio.
If you're new to fund screens,
fund screener can help you identify and answer those questions. Click on Quicken.com's "full-search" screen and you can hunt for funds based on up to 20 variables, starting with the fund's sector, and moving on to things like
front-end loads, or sales charges, and returns ranging from three months to 10 years. By defining these variables as you go along, Quicken.com's screener functions as a kind of online tutorial.
Once Quicken.com's screen spits out a list of funds, you can seamlessly add them to a portfolio or watch list. Add in funds you already own as well. Then use the site's analysis tools to find out how the stocks in all your funds break down in terms of
market capitalization, and what sectors those companies belong to, for example.
fund overlap tool can also help you figure out if there's too much stock or sector overlap among funds you own.
fundfinder pro is more granular. It lets you screen up to 40 variables, including things like the amount of money the fund holds in cash, as well as the fund's risk level or
beta. As with Quicken.com, these variables are defined by a glossary. Fundfinder pro also lets you save a screen you like. So you can spend some time and really develop complex searches.
www.stockpoint.com syndicates its screening tools to brokerage sites like
, as well as online financial information providers like
magazine's Web site.
fund screener seems difficult to use compared with others on the Web. Where MoneyCentral really shines is with its
predefined fund screens. When you use a predefined screen, you're in effect trusting someone else -- presumably an expert -- to fill in the online questionnaire for you. Nothing wrong with that, provided the screen is based on objectives that match your own. MoneyCentral's predefined screens like "Safe and Steady" or "Large Domestic Stock" give you a list of the top-performing funds that have those attributes.
offers a highly simplified
fund screen that features the average one-year return for certain types of mutual funds. Specialty health, for example, topped out all other sectors in 2000 with a 41% gain, and diversified Asia/Pacific stock funds were down more than 35% on average last year. Click on any of these groups and get rankings for the specific funds for the same period.
Talking about historical returns brings up a good point about fund screens in general: Their outputs are based on past performance. Often those results can fool even experienced investors. (I wrote about tools that attempt to forecast future performance in
columns.) As a recent
report revealed, highflying technology funds with triple-digit gains during 1999 were down by as much as 72% in 2000. Past performance, as they say, doesn't guarantee nothing.
Which is why you shouldn't put your money into a fund simply because it appeared on a fund screen. Consider the screen a starting point to a bit more research.
Morningstar.com, the Web's mutual fund megasite, has a disappointingly simplified screen. The site's real value stems from its detailed reviews of individual funds. (Certain reports are only available to premium members who pay $99 per year.)
Some online tools eschew commentary and instead use cold-hearted mathematics to render opinions on funds. Check out
Total Sum and
Portfolio Science if you want a read on how risky it might be to own a particular fund. All three sites were reviewed in detail in a previous
And if all this long-term stuff has you yawning,
FundAdvice from fund analyst Paul Merriman contains model portfolios designed for the controversial practice of applying market-timing methods to mutual funds.
The Happening NYSE
My thanks to those of you who emailed back with opinions on whether
changes at the
will lure active traders away from the
. Those results will appear in a future column.
Mark Ingebretsen is editor-at-large with
Online Investor magazine. He has written for a wide variety of business and financial publications. Currently he holds no positions in the stocks of companies mentioned in this column. While Ingebretsen cannot provide investment advice or recommendations, he welcomes your feedback and invites you to send it to