Mutual Fund Screening Tools
In the presence of a vast universe of mutual fund offerings, mutual fund screening tools help fund investors select funds that meet their set criteria. Individual investors may have concerns over different aspects of mutual funds, such as cost to own a fund, fund risk and return, investment strategy and fund portfolio holdings. The usefulness of a screening tool depends on how inclusive its built-in criteria are, as well as the number of mutual funds available for screening. An effective mutual fund screening tool often provides users with additional detailed information on the funds screened.
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Types of Tools
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While Internet-based mutual fund screening tools are most popular and easy to use, mutual fund screening can also be done manually using information from financial newspapers or magazines, if the task at hand is simple and straightforward. Moreover, disk-based mutual fund screening tools provide the most sophisticated screening process with more flexibility in criteria setting and in-depth information on tens of thousands of mutual funds. Disk-based screening tools are also the most expensive, while the ones offered by many websites such as Morningstar and CNBC are free to registered users.
Screening Criteria
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Common criteria for mutual fund screening tools include fund type, fund fees, risk ratings and returns. Mutual funds can be classified into many groups and categories based on asset class (stock or bond), sector and industry, company size, and investment approach (growth or value). Fund fees are a common concern for potential mutual fund investors, and common screening tools should allow investors screen funds based on loads, or broker charges, and expense ratios. Risks and returns are at the center of a screening process that may compare a fund performance with peer average or a market benchmark.
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Mutual Fund Data
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In addition to having broad and flexible screening criteria, good mutual fund screening tools also provide detailed information on each mutual fund included in their screening database. Such data may contain information on a fund's historical performance, portfolio holdings, turnovers and fund operations. Standard performance statistics should include annualized fund total returns over the past one, three, five and ten years, as well as year-to-date returns. Portfolio information may show a fund's top holdings along with the frequency of its portfolio turnovers. Besides data on fees and expenses, information on fund operations also provides guidance on fund purchases and withdrawals, and provides information on the fund management team--their tenure and track record.
Screening Updates
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It is important for the benefit of the users that data of mutual fund screening tools are kept current through periodic updates. Profiles of mutual funds can change over time--their fees, risk levels and returns, portfolio holdings and even investment strategies. A mutual fund screening tool can have the broadest set of screening criteria, but without updating fund information to its database on a regular basis, the screening tool may provide false results to users. The frequency of information updating will affect the accuracy of the screening tool. Note that although price information may be current, other information may be updated on a longer interval such as monthly or quarterly.
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