Fund Families and Categories

Updated 06/12/08

Mutual funds and stocks are organized into buying families like Fidelity, Vanguard, etc. by the name of the sponsoring investment company. Funds are also organized into objective families like GROWTH, HEALTH, etc.

These families separate funds based on statistical and fundamental qualities. The Family Tab displays all the Fundamental and Objective categories. Click for instructions on using the Family tab.

For a discussion and illustration of the individual families in alphabetical order, see below. Note not all families are listed here. Where the definition of the family is obvious (like Energy, Europe, HiTech, etc., the only definition is given in the family description.

ADJRATE Adjustable Rate Government Securities

These funds are among the least volatile of all funds. Since they adjust their dividends with the current inflationary environment, the funds are somewhat immune to capital losses as occur in fixed-return bond funds.

ADM and ADV Families

See assorted families

ALL Categories - The Broadest Classification of Fund Types

• ALL  Includes everything in the database.
• ALL-EQ All equity funds Includes funds that had at least 75% of assets in either foreign or domestic stocks as of 7/1/94. ALL-INC All income-oriented funds Generally, these funds will hold mostly bonds. Includes money market funds. ALL-INT All international funds These are funds of many types: stocks, bonds, convertibles, etc. Includes broad-based, regional, and single country funds.
• All-INC All income oriented funds. Note how closely this family correlates with the BD-ALL family,
• ALL-MIX All funds have a mix of more than 30% stocks and 30% bonds. ALL-OTH All securities and indices not classifiable in other ALL categories.

Assorted Category

Effectively a miscellaneous category. These families may be families

• that are used within commentary or the online help for teaching the use of FastTrack.
• that are permanent members see below.

Challenges in Fund Names

In the good old days there were class A and B shares designating front and back end loads. These days, fund companies have gotten very creative with regard to classes and shares. There are no standards.

ADM Family, ADV family "Administrative", "Admiral", or "Advisor"  class shares.
These shares are usually used by investment advisors for their clients. However, there is no standard definition of these terms. Generally, Individual investors would not buy ADM shares when there a other classes of the same funds. Most individuals should  use the Family Tab sieve to remove these shares from their personal families.

INST family: Institutional Shares have no standard definition. Some fund companies use this designation for shares sold in brokerage programs. Thus, you would commonly find these funds in the Family Tab category, Buying / Brokerage families ( "B- . .  ." ). Some shares are INST to indicate that they have higher minimums, and sometimes, lower cost fee structures. Some INST shares can only be purchased through investment advisors. Generally, an individual investor would NOT buy INST funds when there are other no load classes available UNLESS these shares are offered through his brokerage trading program.

INV family: Investor Class are ,generally, available to individual investors

SER: Service Class shares have no  standard, or even common, definition.

ASSTALLC Asset Allocation -   Shifts Allocations primarily between Bonds and Equities.

BALANCED - Always holds both bonds and stocks in significant portions.

Generally, Asset Allocation funds purport to shift allocations over time. How this strategy differs from other type of fund management strategies is often not clear.

Balanced funds, generally, hold about 70% equities and 30% bonds.  Unlike asset allocation funds, BALANCED funds usually mandate holding a relatively static allocation.

• The AVG ASSTALLC (red line) is very much like the AVG BALANCED (yellow line).
• Both are well correlated (Cor=90%+) to the S&P 500 (green line).
• BALANCED has done better than ASSTALLC, but with a higher SD= . . . more risk, more return.

Brokerafge Families

These families of mutual funds are named for the brokerage programs that sells them. Most mutual fundsoffer their products through brokerages.

The advantage to the investor is that the investor may trade from a Berger, to a Janus, to the Kaufmann mutual fund simply by making a call to the brokerage without having to send paperwork with each mutual fund company to redeem and open new accounts with the mutual fund companies.

 This gives the small mutual fund companies the opportunity to compete with Fidelity and the other industry giants who offer a broad spectrum of differing objective mutual funds.

Click for more details on buying mutual funds through brokerages.

Collection Details

Gathering brokerage details like is a laborious time-consuming manual task. The listings provided to us are often out of date when we receive them. We regret this inconvenience.

Further, the classes and characterizations of funds do little to clarify the offerings. Many load funds are available without load through brokerages. Further, many funds classed as "Advisor" or "Institutional" funds are available through brokerages to retail individuals. These are fund industry problems that we can simply report, but not solve. Your patience and understanding is appreciated.

Bond Fund Families

The high quality bonds of US companies and the US government differ a bit in return and volatility . . . but not much. Note the lower cluster of 4 lines that follow the same pattern.

Junk bond mutual funds (light and dark blue lines) are different creatures. Try timing these mutual funds using a 30-day moving average. Most mutual fund companies have restrictions on the amount of trading you are allowed to do.

• The BD-INTJ family contains mutual funds that hold  international junk bonds. The holdings used to be primarily of securities termed "Brady Bonds" whose principal payment is guaranteed by the US government, but whose dividend payments are not guaranteed. The value of these bonds is greatly influenced by the financial stability of the issuing country and the word monetary situation. Increasingly, however, the mutual funds are investing in emerging market   debt including debt of Eastern European countries.

• The BD-JUNK family mutual funds hold primarily US corporate bonds are of lower quality. These bonds took a drubbing in 1990 during the Drexel Burham debacle, but since then have recovered nicely.

How Different are the Bond Families?

The higher quality bond differ only by volatility and return. BD-JUNK (US Domestic lower quality corporate bonds) and BD-INTLJ (International Corporate lower quality bonds) are entirely different creatures.

Bond Families

• BD-ALL Bond funds of all types

• BD-CORP General Corporate Bonds

• BD-GLOBL Global Bonds including

• BD-INTLJ International Junk Bond Mutual Funds

• BD-INTMD Intermediate-term maturing 4-10 years.

• BD-INTNL International Bonds not Including US

• BD-JUNK High Yield Corporate Bonds

• BD-LONG Long-term bond mutual funds of all types

• BD-MDQLY Moderate-quality bonds of all types.

• BD-MORT Mortgage bonds (Ginnie Mae) GNMA

• BD-MUNHY Municipal Hi-Yield bond funds

• BD-MUNI General Municipal Bonds

• BD-SHORT Short-Term bonds < 4 years

• BD-USGOV US Government bond funds of all types

• BD-ZEROC Zero Coupon Bond Funds

Red, green, and yellow lines show long, intermediate, and short-term maturity bond funds. The longer the more volatile and higher return.

The purple and cyan lines illustrate US government bonds of mixed maturities.  A daily AVG looks much like the intermediate bond line. However, when the FastTrack Momentum Model is applied, to BD-USGOV AVG the importance of allocation shifting becomes apparent . Note the flattening of the AVG in downturns compared the the BD-LONG AVG plus the very strong return.

BLEND These funds invest using a combination of growth and value investing styles.

This family is as defined using Morningstar's 1/22/96 Principia CD. The family is of little value. It is included for educational purposes only.

• Note that all the various lines look the same.
• Most have a 90% or more correlation (Cor=) with the S&P 500.
• Morningstar describes Blend as a mix of growth and value . . . and we do see the purple blend line falling midway between the red growth and yellow value lines.
• There is a trading strategy that operates between Growth and Value using families more narrowly defined that Morningstar's families.

You are NOT holding a diversified portfolio if you own a growth mutual fund, a value mutual , and a Blend fund . . . you might as well own an S&P Index fund.

Classification by the Portfolio Holdings Size

The family named start with CAP-, and will be found in the Fundamental Category. These families characterize the size of the companies whose stocks are held in the mutual fund's portfolio. The names are obvious except for

CAP-ALL - Holds any stock
CAP-NLG - Holds everything but large cap.
CAP-NA  - Holdings cannot be evaluated.
CAP-NSM - Holdings include big and mid size companies, but not small companies

The numerical boundaries of the families shift slightly every time we make the families (about every 60 days). The description of the family that you'll see within the Family Editor shows the criteria that were used to pick the family.

• If you'd like your mutual fund managers to discover all the great new young companies and ride their success to fortune, then take a look at the CAP-MICR (MicroCap Mutual Funds) families.
• If you're more into preservation of capital, then look at the CAP-BIG mutual funds that invest in more mature and stable companies.

You'll be surprised that some "Small Cap" mutual funds by name don't fall into the CAP-SMAL category . . . in the mid 1990's  with the surge in Large Cap stocks, many Small Cap fund managers fudged on their objectives. With the surge in small cap stocks in the early 2000's the large cap fund managers did the same. In general, mutual funds tend to invest in the largest companies in their target segments since liquidity is usually better when trading these stocks. Therefore, many "SmallCap" funds invest in companies you would consider quite large.

When we rebuild families, we attempt to balance the categories of funds such that LargeCap and SmallCap funds are distributed approximately as follows:

CAP-BIG 1/2 of all equity funds
CAP-MID 1/3 of all equity funds
CAP-SMAL 1/4 of all equity funds

CAP-MICR, CAP-NLG, CAP-ALL, and CAP-NA comprise the rest. Requirements for CAP-MICR are quite stringent and the family size varies overtime

How Accurate are FastTrack's Characterizations?

CAP-BIG AVG is 98% correlated to the Vanguard S&P 500

CAP-SMAL AVG is 98% correlated to Vanguard Russell 2000

CAP-SMAL to CAP-BIG Trading Strategies

• CAP-BIG Biggest cap, typically holding stocks in the S&P 500.

• CAP-MID Mid Caps, typically holding stocks that in the S&P Mid Cap Index (SP-MC).

• CAP-NA Market cap not known

• CAP-SMAL - Small Caps, typically holding stocks in the Russell 2000 Index (RUT-I)

• CAP-MICR Micro, smallest cap. There is not general wat to characterize holdings. The mutual funds are usually not well correlated with each other.

CONVERT Convertible Securities

These mutual funds invest in convertible issues. Convertibles offer holders the opportunity to convert part or all of the shares to bonds or equities. As such CONVERT mutual funds are less volatile than the yellow broad market line as CONVERT mutual funds value and return is somewhat protected . . . however, such protection comes at the expense of gains.

Not surprisingly, the green Vanguard Convertible Fund (VCVSX) looks much like the red average of all CONVERT mutual funds. Most Vanguard mutual funds invest broadly in indices. The greater returns of the purple Fidelity Convertible mutual fund (FCVSX) comes at the expense of greater risk. 

Classification by Correlation with Broad Indices

Many, many mutual funds follow the pattern of the broad US market as expressed by the major indices. These families categorize mutual funds by the extent to which their movement can be attributed to the movement of relevant 'broad' indices.

For example, COR-HI might contain US growth mutual funds, international equity funds, muni-bond funds, etc. They aren't well correlated with each other, but they are well correlated with a relevant 'broad' index like the S&P 500, Russell 2000, Lehman Bond Index, MSCI international indices, etc.

• COR-AVG Typical level of relationship
• COR-HI Highly related to the movements of a broad market index
• COR-LOW Poorly related to a broad market index. These mutual funds often offer excellent trading opportunities among each other. Sector mutual funds fall into this group.
• COR-NA Correlation information not available.
• CONTRA- The funds is negatively correlated to a market index. These are, for the most part, bear (short welling) funds,

• CURRENCY Money fund denominated in a foreign currency
• CYCLICAL Specializing in cyclical industries

ExTraded Family

These are mutual funds that trade like stocks. For more see Wikipedia .

Click for a discussion of trading ETFs

ETFIndex Family

Most ETFs have an index based of the holdings of the ETF. This index is the basis for evaluating an ETF's NAV. FastTrack provides the closing prices for these ETF indexes so you can compare the ETF's day-to-day change to it's target index. Also, when the ETF-Index is available via real-time charts on the internet, the "Trading Range" option in the Internet Tab will show you how far the ETF is trading from it's index. You should consider the gap between an ETF and its index an expense much like a load. The gap is commonly 0.5% on every buy and sell. For the most popular and most liquid ETF's (Like SPY and QQQQ) the gap is rarely more than 0.1%

ETF-INT Family

Classification by Fund Size (Total Assets)

Big mutual funds (FS-BIG) with Billions and Billions in assets have a hard time trading. Their sheer size means they can trade only very small portions of their portfolios each day. Their own trading could move share prices dramatically in the wrong directions. The impact is less when large market cap stocks are traded vs. small market cap stocks.

Aggressive investors, generally, prefer to hold mutual funds with small total assets. The numerical boundaries of the families shift slightly every time we make the families. The description of the family that you'll see within the Family Editor shows the criteria that were used to pick the family.

• FS-AVG
• FS-BIG
• FS-GIANT Industry steamrollers like Fidelity Magellan
• FS-NA - Asset size unknown
• FS-SMALL
• FS-TINY The smallest of mutual funds.

When using FS-SMALL and FS TINY consider removing the enhanced index and bear funds that are part of the family. These substantially impact the averages.

The results above illustrate a bias going back into history . . . Funds that did well in the past attracted assets and are no longer in the FS-TINY family.

Classification of "Growth" Mutual Funds

There is no more ambiguous term applied to mutual funds than "growth". Here's how FastTrack separates this universe.

GROWTH Typical Growth Equities
These diversified mutual funds must have a modest annualized income distribution (less than VFINX), hold mostly equities, and have a Standard Deviation in the mid-range of all diversified, domestic equity funds.  

GROWINC Growth and Income Equities
These diversified mutual funds must have an above average stream of income distributions (more than VFINX, but less than VIVAX), hold at mostly equities, and have a Standard Deviation in low-range of all diversified, domestic equity funds.

INCOMEQ Income Equities.
These diversified mutual funds must have strong income distributions (more than VIVAX), hold at mostly equities, and have a Standard Deviation in low-range of all diversified equity funds.

GROWTH-N Growth in-the-Name Equities
The GROWTH-N family is made in a simplistic manner. It includes funds that have the word 'growth' in its name and that hold at least 80% of assets in equities. Mutual funds whose names include the words, 'income', and 'aggressive' are excluded. There has been no statistics used to characterize the mutual fund's style, holdings, or management philosophy.

GROWTH-M Morningstar Growth Funds.
All types of mutual funds characterized as being "growth-style" mutual funds by Morningstar. If you believe MS GROWTH characterizations are of value, then call Morningstar (www.morningstar.net) and buy their directory or try your local library. The chart compares the carefully selected Morningstar Growth family with FastTrack's GROWTH and GROWTH-N families. It is obvious that the word "growth" in the mutual fund name is just as good a way to select growth mutual funds as FastTrack and Morningstar's more analytical methods.

HITECH High Technology Sector Mutual Funds

INDEXFAM The family of all the various market indices. This also includes data on hew highs, volume, etc. The AVG of this family is NOT meaningful because the nature of some of the data ( for example advances, declines, new highs, new lows)  is highly volatile and does not display well with fund price data. 

INDEXFND high correlated to a  relevant index

INST Institutional Class funds . See assorted families .

INV Investor Class funds . See assorted families .

International Families

• ALL-INT All international mutual funds including bond and equity funds.
  These are mutual funds of all types (bonds, stocks, convertibles, etc.) that MUST invest at least 50% of assets outside the US. This does not include mutual funds that are listed under GLOBALEQ and BD-GLOBL category that may invest a large portion of assets in the US.
• BD-GLOBL Global bonds including US bonds
• BD-INTNL International Bonds (not significantly US bonds)
• BD-INTLJ International Junk Bonds. These bond funds hold largely Brady bonds. These foreign bonds issued by emerging countries are guaranteed to repay principal by the US Federal Government. However, there is considerable risk that dividends might not be paid and when the principal will be repaid.
• EMERGE Emerging Markets Funds. Includes broad-based funds with investments in 2 or more regions, for example, funds holding both in Asia and Latin America.
• EUROPE Western European Equities. Includes European single country funds.
• GLOBALEQ Global Equities including US equities These mutual funds invest in common stocks anywhere in the world including the US. Some of these mutual funds resemble broad-based international funds. Some resemble the S&P-500. It all depends on the style of management. These mutual funds have the charter to invest anywhere whereas INTERNEQ funds must invest almost entirely outside the US.
• INTERNEQ International Equities, not including US
  These broad-based funds that invest in many countries and several regions.
• JAPAN - Japanese Securities. These are also found in the SINGLE, ALL-INT, and INTERNEQ families
• LATIN - Latin American Securities Includes single country funds for countries in Latin America. These are also found in the SINGLE, ALL-INT, and INTERNEQ families
• NEW-ASIA- Pacific rim nations NOT including Japan. Includes single country funds for countries in the Pacific Rim. These are also found in the SINGLE, ALL-INT, and INTERNEQ families
• SINGLE - Single Country Funds These funds invest in a single country. They are included in the broad families like INTERNEQ , and in regional categories like LATIN, EUROPE, and NEW-ASIA. Of course, they are also in the ALL-INT family.

Classification by Load

It is impossible to characterize all the different load categories. For the most part, we have computed the load at the highest fee charged if the fund were bought in January and sold in December of the same year. Some mutual funds have a redemption fee that disappears with time. If it disappears within a year them we consider the fund to be a no load.

• LOAD-AVG Load is 3-4.5%
• LOAD-HI :High Load > 4.5%
• LOAD-LOW: Load is 3% or less but not 0%
• LOAD-NA: Load is unknown or has a complex tier of charges.
• LOAD-NO No Load fund (may have 12B-1) % 

Classification by Manager Tenure

The experience of the manager is often believed to be a factor in the performance of a mutual fund. This issue is clouded in that the more aggressive funds and sector funds tend to turn over managers more quickly, yet these mutual funds can be top performers for long periods. The more conservative mutual fund managers tend to stay on the job longer, yet these mutual funds by design underperform the more aggressive mutual funds. In our classifications, we took into account the time during which the manager has managed his current mutual fund AND his tenure at comparable objective funds. Therefore, a relatively young mutual fund like the Yackman fund has a senior manager since Donald Yackman has a long record at managing other aggressive growth mutual funds in the past. The best use of this family is to sort out mutual funds that are of the same objective. For example, using FT's family editor to separate long manager tenure BALANCED or GROWTH funds from short manager tenure funds. The numerical boundaries of the families shift slightly every time we make the families. The description of the family that you'll see within the Family Editor shows the criteria that were used to pick the family.

Classification by Mutual Funds Manager Tenure

• M-AVG Manager has average experience, typically 3-6 years.
• M-LONG Manager is experienced, typically more than 6 years.
• M-NA No classification available
• M-SENIOR Senior fund management, typically more than 9 years
• M-SHORT Manager has limited experience with fund, 1-3 years. %

Seems pretty obvious that manager tenure is a minimal influence. However, bond managers tend to stay on the job longer than equity managers. The would lower the return and volatility of the M-SENIOR family (and this is what the chart shows.)

Since these AVGs contain both bonds and equity funds, you might consider using the family sieve to separate out the M- families' equity funds and then redraw the charts with the equity only families.

MONEYMKT Money Market Funds

VMFXX is a pretty good money market fund, and is the fund of choice that we have used in FastTrack trading examples since 1989.

The average money market lags VMFXX.

Using the FastTrack Momentum Model Monthly to select a Money market fund is the best money market strategy  of all . . . however, this is not a strategy you would like want to try.

Most funds trading programs do not offer the money market funds of many companies. You would have to redeem and move the money manually to achieve the yellow line. The delays and costs of doing this type of trading eat up returns.

Morningstar Families 

These families were constructed using Morningstar mutual fund ratings. 

The upper grouping of families is for historical purposes. It suffers from survivorship bias. The best of funds still exists. The worse funds that were in the families are no longer in the FT Database.

The lower group is always 30-90 days old. the purpose of providing and updating the group is to help you determine the value of Morningstar ranking in making your investment decisions

Determining the Morningstar rating period

This is a relatively easy exercise.

1. Display the daily AVG of the MSTAR-1 (funds ranked worst)
2. Display the AVG of the MSTAR-5 family (Funds ranked best)
3. Display the T and R charts.
4. Move the pole to the month end where the flat portion of the R chart begins. This will the the last date of the period Morningstar used for their rankings.

Huh?

From the last day of the rating period, the worst Morningstar funds and best funds tend to perform about the same. The inflection point is not always as clear as in this particular example. Generally, however, the MSTAR-1 AVG will be slightly more volatile.

• OPTIONIN Option and Income Equities
• PRECIOUS Gold and Precious Metal Sector 
• REALTY Real-estate Funds %

Risk-adjusted return Categories

These families are rebuilt periodically as new funds are added to the database. The funds are evaluated with respect to the performance of their relevant index.

• RR-AVG: Risk return, when compared to the Relevant Index for the past year, is typical, average, not good or bad.
• RR-GOOD This means that the return is higher than expected considering the volatility of the mutual fund. However, this doesn't mean that owning the fund will make you money.
• RR-POOR Risk return when compared to the Relevant Index is poor. The fund either has too little return or too much volatility.
• RR-NA. RR rating Not available. Usually this is because the mutual fund has insufficient history to be rated.

• SECTOREQ Sector Mutual Funds

• SER: Service Class funds . See assorted families .

• SOCIAL Socially & Environmentally Responsible

• UTILITY Utility Sector Equity Funds %

Value Oriented Mutual Funds

Value mutual funds invest in securities that the mutual fund manager considers under- valued or out-of-favor. Usually these are mutual funds that invest in mostly low P/E, domestic (US) securities.

• VALUE
  These mutual funds the words are mostly highly correlated to Russell Values indexes.
• VALUE-MS
  Mutual funds of all types that are considered contrarian using information obtained from Morningstars
• VALUE-N
• Mutual funds whose names contain the word "Value"

It is apparent that the the value concepts used by FT and Morningstar are very similar. However, neither method is much better than relying on the presence of the word "Value" in the fund name. Nonetheless, the designation "Value" clearly distinguished  group of funds from the broad market in the 1998-2003 bull and bear markets.