by Joe Lan
At AAII, we provide numerous stock screens that are designed to allow investors to see how well different investment strategies have performed over the course of time. These stock screens offer a glimpse of the types of characteristics that strong stocks exhibit. Additionally, these screens offer users a way to winnow down a huge universe of stocks to a more manageable number so that you can perform further research on stocks worthy of your time. With thousands of exchange-listed companies to choose from, investors would be overburdened by the sheer number of possibilities if it were not for some screening method.
And while stock screening is widely used by investors, mutual fund screening seems to take a back seat. However, this should not be the case. The universe of mutual funds is actually much more expansive than the universe of stocks. While most of the top stock screeners available to individual investors cover a universe of around 5,000 to 10,000 companies, mutual fund screeners usually contain over 20,000 mutual funds. Furthermore, individual investors are more apt to invest in mutual funds than in individual stocks. According to ICI, U.S. households owned $14.7 trillion in mutual funds, ETFs, closed-end funds and unit investment trusts in 2012. Therefore, it can easily be argued that screening is more useful to mutual fund investors than to stock investors. But which fund screeners are worth looking at?
In this Comparison article, I provide an in-depth comparison and analysis of the best mutual fund screening programs and websites available to individual investors.
Mutual funds, as well as exchange-traded funds, hold several advantages over buying and managing an individual stock portfolio. As we all know, diversification is key to lowering your risk while maintaining an expected return. Although most investors would not hold just a single fund, it is actually possible to diversify your portfolio with just one broad-based mutual fund. In addition, mutual funds are generally actively managed, meaning that most of the hard work is done for you (at a higher expense ratio, of course). Investors still need to keep an eye on their asset allocation, especially if employing mutual funds for specific sectors or asset classes, but they will not need to spend time picking individual stocks.
An Overview of Screening
The criteria used in mutual fund screening are generally different from the criteria commonly used in stock screeners. Fund screens are built with criteria that investors find important in mutual funds, such as performance, expenses and risk level.
The ability to find a manageable number of mutual funds that meet your criteria is invaluable, but the screening process can also help you round out your portfolio. An investor who lacks holdings in a certain asset class, sector or even style is able to quickly find all mutual funds within the desired area, making the decision-making process much easier.
Keep in mind that ETFs are also capable of offering this type of diversification benefit. The main difference between mutual funds and ETFs is that actively managed mutual funds have higher expense ratios. This active management is only “worth it” if the mutual fund is able to stay ahead of its appropriate index. Most ETFs are passively managed and therefore have lower expense ratios. These funds are meant to follow an index as closely as possible.
In the past, software-based mutual fund screeners were more dominant than online screeners, mostly because of the immaturity of the online choices. The software programs are highly flexible and provide a wide range of statistics. In addition, the screening capabilities are usually more comprehensive than those offered by online screeners. However, one disadvantage is that the data provided by software-based mutual fund screeners is usually updated monthly or quarterly via a data download, making software-based screeners more expensive than their online counterparts. The fees can add up.
Online mutual fund screeners have caught up to software programs and have been a viable option for a number of years. Their lower cost along with their increased flexibility and capability has made online screeners a popular choice among individual investors. Since these screeners are Web-based, there is no need to download updates. The data provided is generally updated daily for dynamic figures, such as net asset value, and monthly for reported figures such as portfolio composition. Since online screening services are constantly improving their offerings, it is very likely that these screeners will eventually replace software-based services altogether.
Characteristics of the Top Screeners
When selecting a mutual fund screener, there are several important factors to consider. Of course, the price to use the screener will always be a central consideration, but equally essential are the flexibility and the offerings that the screener provides. Investors should weigh the universe of stocks, the data points available for screening, the service’s ease of use, the depth of fundamental data and the frequency of updates provided by the program.
One of the most important characteristics of a top mutual fund screener is the fund universe. The number of funds in the database should be exhaustive. The best mutual fund screeners have increased their universe since our last comparison two years ago. Both Mutual Fund Expert and Morningstar.com, for example, offer mutual fund screeners with a universe of over 26,500 mutual funds.
Criteria Available for Screening
The criteria available for screening should also be comprehensive. More importantly, criteria that you frequently use, and consider important, should be included. We take both of these factors into careful consideration when deciding on our top screeners.
For mutual funds, the screening criteria used will differ slightly from those used for screening stocks. For example, stock screening may focus on figures such as growth rates, or value items such as price-earnings ratios. For mutual funds, these criteria may not be applicable. Most individual investors should focus on items such as long-term performance history, expense ratio, turnover ratio, risk and minimum purchase requirement when choosing among mutual funds.
Frequency of Updates
Disk-based screeners typically provide updated data on a monthly basis, usually available through an online download. Needless to say, the software-based programs are not updated unless a new download is provided and installed. In the case of Mutual Fund Expert, downloads are made available usually by the fifth business day of the month.
Most of the data in online programs are also updated monthly. Items such as price, price charts and net asset values may be updated more frequently (sometimes daily). But for the most part, data elements are tied to a monthly marking-to-the-market that is performed by the mutual funds.
Depth of Fundamental Data
Another important feature is the amount of data on each fund provided by the service. Disk-based programs are usually more expensive, but typically provide a wealth of data including graphs and sector information.
The depth of data provided by software-based programs is still better than what is found in Web-based services. However, online programs have become increasingly expansive and offer most of the data points the individual investor needs. For the most part, high level online mutual fund screeners are housed within comprehensive all-in-one investing websites, so you have quick access to the mutual fund data provided by the site itself.
Ease of Use
The screeners that were reviewed here had obvious trade-offs. The online-only screeners were easy to use and simply involved selecting criteria and running screens. The software program Mutual Fund Expert is more complicated and takes some time to master, but offers additional customization.
For most investors, online mutual fund screeners will satisfy. However, power users may still want to opt for a software-based mutual fund screener.
Top Fund Screeners
The comparison grids display a side-by-side comparison of the mutual fund screeners reviewed here.
|Mutual Fund Screening Software||Mutual Fund Expert Personal||Mutual Fund Expert Professional||Mutual Fund Expert Pro-Plus|
|Company||Steele Systems Inc.||Steele Systems Inc.||Steele Systems Inc.|
|Price||$22/month; $32/quarter||$52/month; $92/quarter||$62/month; $122/quarter|
|Platform||Windows (Vista, 7 & 8 compatible)||Windows (Vista, 7 & 8 compatible)||Windows (Vista, 7 & 8 compatible)|
|Database||Total Number of Funds||26,733||26,733||26,733|
|Content||Number of Data Fields||196||251||834|
|Performance||Monthly Total Returns||last 120 months||last 120 months||1962 to present|
|Quarterly Total Returns||latest quarter||latest quarter||latest quarter|
|Annualized Returns||1/3/5/10 years||1/3/5/10 years||1/3/5/10/15/20 years|
|Return for Individual Yrs||last 10 years||last 10 years||1962 to present|
|Comparison||% rank, +/- category||% rank, +/- category, +/- index||% rank, +/- category, +/- index|
|Risk-Related Data (see key)||a, B, R-sq, st dev, avg mat||a, B, R-sq, st dev, avg mat, S, T||a, B, R-sq, st dev, avg mat, S, T|
|Portfolio Information (see key)||mgr, comp, foreign||mgr, comp, lg hold, foreign||mgr, comp, lg hold, foreign|
|Screening||Number of Data Fields for Screening||196||251||834|
|Number of Data Fields for Ranking||196||251||834|
|Monthly Returns||yes (latest month)||yes||yes|
|Quarterly Returns||yes (latest quarter)||yes (latest quarter)||yes (latest quarter)|
|Portfolio Composition Information||yes||yes||yes|
|Screen for ETFs||yes||yes||yes|
|Save Screen Criteria||yes||yes||yes|
|Export to a File||yes||yes||yes|
|Mutual Fund Screening Service||Morningstar.com Premium Fund Screener|
|Delivery Medium (Software/Internet/On-Line)||Internet|
|Platform||any PC with Internet|
|Database||Total Number of Funds||26,500+|
|Content||Number of Data Fields||300+|
|Performance||Monthly Total Returns||latest month|
|Quarterly Total Returns||last 28 quarters|
|Annualized Returns||1/3/5/10/15/20 years|
|Return for Individual Yrs||last 7 years|
|Comparison||% rank, +/-category, +/- index|
|Risk-Related Data (see key)||a, B, R-sq, st dev, avg mat, S|
|Portfolio Information (see key)||mgr, comp, lg hold, foreign|
|Screening||Number of Data Fields for Screening||300+|
|Number of Data Fields for Ranking||300+|
|Monthly Returns||yes (latest month)|
|Quarterly Returns||yes (latest quarter)|
|Calendar-Year Returns||last 7 years|
|Ratings||yes (Morningstar Ratings)|
|Portfolio Composition Information||yes|
|Screen for ETFs||yes (separate ETF screener)|
|Save Screen Criteria||yes|
|Export to a File|
|Key to Risk and Portfolio Abbreviations|
|Risk-Related Features Data|
|a: alpha, market risk-adjusted performance figure|
|avg mat: average maturity (for bond funds)|
|B: beta, a measure of market risk|
|R-sq: R-squared, proportion of beta related to market|
|st dev: standard deviation, volatility of fund’s return|
|S: Sharpe ratio, standard deviation-adjusted measure of performance|
|T: Treynor ratio, beta-adjusted measure of performance|
|cap gain: unrealized capital gains|
|comp: portfolio asset composition|
|foreign: percentage of fund in foreign securities|
|lg hold: largest holding of fund|
|mgr: portfolio manager and tenure|
As mentioned, disk-based screeners are usually more expensive than online screeners, but they offer robust depth of information and flexibility that cannot be found in online screeners. Their capabilities can outweigh the costs for sophisticated investors. In addition, most software programs come with extensive fundamental data on each mutual fund, which can save investors time and energy.
Mutual Fund Expert and Morningstar.com continue to impress and are featured again this year. SmartMoney.com has recently announced that it is ending its stand-alone website and its features will be merged with MarketWatch.com. Therefore, SmartMoney.com has been removed from this comparison. Additional online mutual fund screening services are available, and some are free. Unfortunately, their features pale in comparison to the top screeners mentioned in this article.
Mutual Fund Expert
Mutual Fund Expert, by Steele Systems Inc., offers three levels of mutual fund screening services: Personal, Professional and Pro-Plus. Since our last comparison, Mutual Fund Expert has consistently kept up with the increasing number of mutual funds available. In 2009, the program contained roughly 24,000 mutual funds. The number increased to over 25,000 in 2011, and now the program covers 26,733 mutual funds (according to Steele Systems).
All the data provided by Mutual Fund Expert comes from Morningstar and is updated monthly. The quickest and most timely way to update the database is by downloading the updates online (this also ensures that you have the most timely data). The database is uploaded online on the fourth or fifth business day of each month. Passwords to unlock the database are emailed to you. You may also opt to receive a back-up CD, which is shipped around the middle of each month.
The Personal version offers 196 data columns, which can be used for screening, while the Professional provides 251 columns and Pro-Plus has 834. The fund information and fund characteristics provided are similar for all three levels, giving the fund’s share class, asset category, geographical area, number of years since inception and Web address. The program separates funds by type: true no-loads, funds with systematic withdrawal plans, funds of funds, index funds, enhanced index funds, socially responsible funds, life cycle funds, hedge funds and institutional-only funds. In addition, the Professional and Pro-Plus services distinguish between master-feederfunds and HOLDRS (holding company depositary receipts).
Each level of service provides the name of the senior manager, the manager’s start date and number of years, and the name of the fund family. The Professional and Pro-Plus service levels also provide the name of the management company.
Performance figures and risk statistics vary greatly between the three service levels. All three provide calendar-year and monthly returns for the last 10 years. In addition, the services report one-, three-, six-, nine- and 12-month returns; year-to-date return; three-, five- and 10-year total and average returns; 12-month yield; Morningstar’s star rating; risk-adjusted ratings (one- and three-year); and averages and decile rankings. The Personal version shows common performance numbers and graphs for the last 12 months, risk-adjusted ratings for one- and three-year periods and rankings within style sectors. The Professional version includes calendar-year and monthly returns for the past 10 years. The Professional level also includes one-, three-, five- and 10-year SEC load-adjusted total and average returns, along with other SEC figures. The Pro-Plus version reports calendar-year and monthly returns since 1962, 15- and 20-year total and annualized returns, and since-inception average and total figures. Pro-Plus also presents up-market, down-market and full cycle returns since 1956 as well as SEC tax-adjusted total and average return figures.
Risk statistics provided in all three versions include modern portfolio theory statistics, three-year beta, monthly and annual standard deviation, alpha, R-squared, monthly mean and volatility. The Professional version adds the annualized standard deviation, a three-year Sharpe ratio and the Treynor ratio. The Pro-Plus level expands on the risk statistics included in the Professional version with one-, three-, five-, 10-, 15- and 20-year figures for each. In addition, it presents the Sortino ratio, the Information ratio, upside/downside capture ratios, tracking error, batting average, relative risk, downside and upside deviation, semi-standard and loss deviation, skewness and kurtosis for each time range mentioned.
Creating a screen itself is a relatively simple process, though it is more complicated with than most online screeners. Luckily, the program does a great job of walking you through it. An entire section in the help menu is available on running screens—or filtering the database, as it is called by the program. Each criterion can be compared to a custom value, the value for another fund or an index value. However, you are unable to see the number of funds that pass each individual criterion.
A useful ability of Mutual Fund Expert is to filter using “nested conditions.” Nested conditions provide greater flexibility by essentially providing a third “layer.” For instance, the program can filter stocks that meet condition one and either condition two or condition three. Likewise, it can filter for stocks that meet either condition one and condition two or only condition three. As you can see, this added screening “layer” offers an assortment of new possibilities. Each screen can also be saved for later use.
Overall, Mutual Fund Expert provides a large database of mutual funds (and exchange-traded funds). A robust mutual fund screening service is only one part of the program and, needless to say, purchasing the program will give you access to all the other features. For each mutual fund, the program offers a comprehensive fund detail page in the form of a one-page printable report with key performance, allocation and portfolio analysis data points. The fund comparison section is also useful, showing a fund that you are researching in comparison to other funds in the same category. The page presents ratings, performance and risk analysis and presents a long-term performance comparison in the bottom graph. There is a bevy of other data in the program, including allocation analysis, ranks and averages and graphs for several return periods for each fund in the database. Mutual Fund Expert software still offers one of the most extensive collections of data on mutual funds available to individual investors. The downloads are timely and the installation process is quick and painless.
The top online mutual fund screening services have been comparable with software-based programs for a number of years. Morningstar.com’s premium screener is one of the best available.
Morningstar.com was originally known for its thorough mutual fund data. Over the years, the website has continued expanding and is now a mainstay of our Top Comprehensive Investment Websites comparison. Morningstar.com offers two mutual fund screeners, Basic and Premium. The Premium Fund Screener is only available to those who subscribe; however, it is one of the best screeners available on the Web. This article’s discussion focuses on the Premium service.
The Premium Fund Screener has a database of about 26,600 funds, very close to the number available in Mutual Fund Expert. The data points are broken down into five broad categories: general, ratings, performance, portfolio, management and purchase data. The data points provided are enough for the typical individual investor, but if your needs are greater, Mutual Fund Expert’s supported data fields are much more extensive.In addition to the generic fund data found in the general category, Morningstar’s Premium Fund Screener also makes a distinction for special fund types, including index funds, enhanced index funds, socially conscious funds, life cycle funds and funds of funds. Furthermore, users can screen for stocks that are Morningstar analysts’ favorite or least favorite picks.
The Premium Fund Screener incorporates Morningstar’s proprietary ratings system into the available data points. Morningstar performance and risk ratings are available for screening, as well as the average moat, which is a competitive advantage rating created by Morningstar. In addition, three-, five- and 10-year Morningstar ratings are offered as data points.
The performance section is the most expansive area of this screener. Most of the data points are fairly common, including year-to-date through 15-year return figures, yield and yearly annual returns going back to 2001. The Premium screener also offers the ability to screen on yearly annual returns by percent rank, going back to 2001, and annual outperformance or underperformance of the fund relative to its category. Users can screen using bear-market percent rank, and Sharpe ratio and standard deviation are also available.
Specific portfolio characteristic data points are found in the portfolio section. Funds can be screened based on their composition (cash, U.S. stocks, non-U.S. stocks and bonds), as well as their sector weightings and stock types. There are 11 sector classifications, as defined by Standard & Poor’s. Fixed-income characteristics available as data points include average maturity, duration, credit quality, coupon and price.
Management and purchase data, the final section, lets users specify a fund family and manager name and tenure, as well as characteristics such as minimum purchase amount, level of fees and expenses, and specific fund size.
Creating a custom screen is very intuitive. A dropdown box provides the entire list of data points sorted by category. After selecting a data point, a pop-up box will appear, prompting you to fill the comparison and value fields for that figure. If you are entering a specific value for comparison, a separate pop-up window will appear detailing the ranges for each quartile for your data point. This feature is particularly useful in ascertaining how tight or loose your filter is for a particular data point.
After entering a criterion, the screener will show you how many funds pass, enabling you to quickly tighten or loosen the field.
Morningstar lists all the funds that pass your screen, in alphabetical order. You can sort this list by any column. Morningstar’s fund page and analyst report (also for Premium subscribers only) are linked here for each fund. You can quickly add any of the funds from the list to your portfolio tracker by clicking on Add to Portfolio. An additional interesting feature is “Score on Preferences,” which ranks the funds you select according to how important you feel each criterion is on a scale of one to 10. For instance, if your screen includes criteria for year-to-date returns and fees, but you believe fees are far more important than returns, you can give fees a nine or 10 preference score and set returns at four or five and Morningstar will weight the importance of each criterion and show you the updated results accordingly. This can help you decide between several similar funds that pass your screen.
Morningstar’s free mutual fund screener includes 18 data points for screening. The data points are set so there are limited customization capabilities. Furthermore, the screens cannot be saved.
Although mutual funds come with an associated management fee, they can provide added diversification benefits for investors. Theoretically, a single total market mutual fund can provide adequate diversification for your portfolio. Be sure to take a close look at a mutual fund’s long-term performance compared to its index. If an actively managed mutual fund does not provide long-term returns above the index benchmark, there is no reason to pay for the active-management costs. You are better off with an ETF.
Also keep in mind that there are numerous ways to utilize mutual funds. If you are predominately a fund investor, consider a “core and satellites” strategy. This strategy utilizes ETFs for “core” sectors and styles, such as large-cap blend, where returns above index are difficult to accomplish because the sector is followed by a large number of investors. Utilize actively managed mutual funds for sectors of the market that are more difficult to value and may benefit from active management.
No matter how you choose to utilize mutual funds, a fund screener can help you decide which funds may be best for you. Software-based mutual fund screeners are still the most powerful, but online screeners are constantly improving and are offered at a cheaper price. Choosing a fund screener depends on your individual circumstances. For most individual investors, an online service will be the most cost-effective option. In addition, since most of these are housed within large financial websites, you have quick and easy access to myriad financial data. Investors who are interested in more advanced screening should opt for a software program.