Below are useful tips for reading the mutual fund tables in the September 2009 issue of Kiplinger's Personal Finance.
There's more to picking funds than knowing the numbers. But studying the figures -- returns, fees, risk measurements and others -- is a great way to start the fund-selection process.
Fund. Except for small funds found in "And the Leaders Are...," a U.S.-stock fund must have a one-year record and at least $7.3 billion in assets. Overseas funds must have at least $3.5 billion in assets.
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Total return. Measures the change in value, assuming that dividend and capital-gains distributions were reinvested. Returns for three-, five- and ten-year periods are annualized -- that is, stated on an average annual basis. Returns are for periods to July 1. A dash in a three-, five- or ten-year column means that the fund hasn't existed that long.
Investment style. Describes U.S. stock funds by the kinds of companies they invest in most heavily. Companies are divided into large, midsize and small, and they are characterized as rapidly growing, undervalued or a blend of the two. Nine styles derive from these elements: LarGro, LarBlnd, LarVal, MidGro, MidBlnd, MidVal, SmlGro, SmlBlnd and SmlVal. Other styles: Financial, Health, Gold, Natural Resources, Realty, Technology and Utilities. Also, Misc (miscellaneous categories) and Hybrid (balanced, convertible-bond and asset-allocation funds). Funds with substantial overseas holdings are divided into four categories: Divers (diversified international), Global (funds that invest in both U.S. and foreign stocks); EmgMkts (funds that invest in stocks from a variety of emerging markets); and Special (regional and single-country funds).
Decile rank. Shows performance for each of the past five 12-month periods through the end of June, compared with other mutual funds using the same investment style. Funds are ranked 1 (top 10%) to 10 (bottom 10%). A decile rank of 5 or 6 is average. The decile ranking offers a quick gauge of how a fund performed compared with its peers.
Down market. Down market shows returns from October 9, 2007, through March 9, 2009, the latest bear market.
Volatility rank. Measures volatility among all stock funds on a scale of 1 (least volatile) to 10 (most volatile). The higher the volatility, the greater the potential for gain or loss.
Assets. Shows the amount of money in the fund. If a fund has multiple share classes, we report the assets for all the classes combined.
Manager since. Shows how long the manager (or if there's more than one, the lead manager) has been on board.
Minimum investment. Tells you how much it takes to open an account. For subsequent investments and for IRAs, the minimum is usually lower.
Maximum load. Tells you the highest sales fee for purchasing shares. A figure without a footnote means the commission is deducted from the money you send to the fund. A figure with an r is the maximum redemption fee charged when you sell shares. Funds that charge both sales and redemption fees are footnoted with an s next to the front-end load. The entry none means the fund charges no sales or redemption fee.
Expense ratio. Represents the percentage of a fund's assets taken out annually to cover management fees and other expenses. Expenses are included in total-return numbers.
More tips for using the tables
- Compare funds with others that employ similar styles.
- Funds with decile ranks that are consistently between 1 and 5 tend to produce superior long-term returns.
- If a fund manager came on board recently, long-term results may not be meaningful.
- Investing in a high-risk fund isn't necessarily bad. What's important is that you be aware of a fund's risk.
- Why do we focus on sales charges and expenses? They are predictable, whereas performance is not.
