Many investors wisely understand that the best approach to investing, for them, is to park at least a portion of their investments in one or more mutual funds.
The problem, of course, is that there are some 7500 mutual funds, many of them crowding the same categories, and all of them pursuing the same investment objective: profits. With so many possible places to park your money, it’s only sensible to find a reliable, accurate, and easily understandable way of comparing the various mutual funds of interest to you.
Fortunately, there are several sources of comparative information you can use to help you. Here’s a brief rundown of the most popular ones:
A very good comparative tool is provided by T. Rowe Price, the mutual fund company, at their website.
At this site, you simply use conventional browsing techniques to identify first a family of funds, then a category of funds within that family, and finally a particular fund or funds that you want to see compared to others. One good thing about this site is that you don’t need to arrive knowing anything about the mutual fund landscape to make use of it: not the names of companies offering mutual funds, not which funds each company offers, not even the names or the ticker symbols of any of the mutual funds themselves. It’s a great place for a novice or for any curious mutual fund investor to poke around and learn more about what funds are available, and their characteristics.
This tool allows you to select and compare up to five different funds at one time. Because the tool is provided by T. Rowe Price, however, there’s plenty of encouragement for you to look at some of the packages they offer, as part of your comparative process.
Another good comparison tool is provided by Marketwatch.
Here, you may enter the ticker symbols of the mutual funds that interest you, and then compare them on the basis of their overall returns, risks, fees, and holdings. There’s no list of mutual fund symbols on this page, however, so it’s best not to come here first. Instead, identify the funds that interest you, jot down their ticker symbols, and then use this site to obtain comparative data. This is also not a good place for fundamental or novice investors, because some of the data is fairly advanced or difficult. For example, “risk” data is provided in the form of numbers reflecting each fund’s Alpha, Beta, RSquared, and standard deviation. These are all statistical measures that begin to have value and make sense only after an investor has completed considerable study of technical market analysis.
NASDAQ itself offers a comparison tools.
This system offers a comprehensive symbol lookup function, and allows you to compare as many as 25 different funds at once. Of course, that many comparisons all at once can be overwhelming at first. But it’s nice to know the capability is available if and when you’re ready to use it.
Once you’ve entered the names of the mutual funds you want to compare, the data pours forth in great quantities. You can look at comparisons of your funds’ price quotes (pre-market, after hours, real-time, and so forth), and a variety of basic and interactive performance charts, as well as company news, analyst research, and more. If you’re ready to digest this depth of information, there’s plenty here to keep you busy.
TD Ameritrade offers yet another mutual fund comparison system.
This system allows you not only to compare up to five different funds directly, but to enter the symbols of ordinary mutual funds that interest you, and then be guided to Exchange Traded Funds and/or Closed-End Funds (offered by TD Ameritrade) that have somewhat similar investment characteristics. Sometimes a little slow to respond, once the system comes back to you with data, it offers a comprehensive basis for comparison of the funds you’ve specified.
You can look at their category, rating, current price per share, one year return, expense ratio, market cap, and sales “load” — which is the commission you pay every time you buy in. Many funds, as you know, carry no load at all.
You can also compare the funds’ performance for the current year-to-date, as well as for one year, three year, and five year periods. Another click reveals where your funds appear on the risk/reward graph, using relative measures based on the actual returns of the funds you’re investigating. Each fund is spotted on the chart on the basis of its price fluctuations and its performance during the past five years. This can be helpful if you’re averse to funds that endure large price swings, particularly when their overall returns are low.
The TD Ameritrade comparison tool will also allow you to pull up each fund’s prospectus (must reading, before you invest), and to see where the fund has allocated its investment capital, not only among classic asset classes, including giant cap, large cap, medium cap, small cap, and micro cap companies, but among such economic sectors as: basic materials, communication services, consumer cyclical and consumer defensive companies, energy, financial services, healthcare, industrials, real estate, technology plays, and utilities.
For most funds, this site will also list each one’s top ten holdings by name, although most international holdings turn out not to be specified.
Assuming you like the looks of one or more funds, you can further investigate the investment parameters of each one, including its redemption fees (if any) and investment minimums both inside and outside your retirement account(s).
Morningstar, the authoritative source for a wide range of information about mutual funds, has a fund comparison tool.
The Morningstar system is set up so you can compare just two funds, or several with equal ease. However, you cannot use this comparison tool until you register at the Morningstar site and set up a “no charge” account. Once you’ve done so, you’ll have access to other useful tools, in addition to this one for comparing various mutual funds.
You begin by adding the symbols of the funds you want to compare. With one click, you can see each fund’s Morningstar rating, the descriptive category in which it operates, and such critical data as the fund’s year-to-date returns and the percentage of your money it absorbs as expenses each year.
The system will also display performance data for each fund, mostly focused on each fund’s percentage return and ranking within its category during the current year to date, past month, year, three year, and five year periods.
The Morningstar comparison tool also allows you to specify the relative weight of these performance figures, according to how much they matter to you, and then to compare the funds on those bases. You get to rank each of the performance criteria from 1 to 10, on importance. The results show up in a bar graph that reflects each fund’s composite score, based on the relative weights you specified for the performance criteria. If you’re not clear on how the results were calculated, you can see the details with one more click.
Mutual Fund Comparison Tools
There are other freely-available mutual fund comparison tools, as well. However, once you’ve covered the ground these tools do, there’s not much more learn and not many easier ways to learn it.
The key to success in mutual fund investing, however, is not the comparison tool you use, but the use you make of the tool.
Mutual fund comparisons will never tell you which funds to buy and which to leave alone, or when it’s time to transfer your money from one fund to another. Those moves should always depend primarily on your sense of where the market is going, how soon it’s going to get there, and what your needs will be for security, for cash, and for investment income at particular moments along the way.
Only after you have made your strategic analysis of your own financial situation, and of the prospects for market changes over a specific period of time — and don’t be shy about involving experts to help you complete these analysis — can you begin to zero in on the fund categories and investment goals that are likely to help you the most going forward.
This is where mutual fund comparison tools begin to play an important role. They will help you identify the best-managed fund families, the categories of funds that can be most useful to you, and the most attractive funds within those appealing categories. Of course, you could build your own charts, draw up your own lists, and do the math to see which funds are best suited to become part of your investment portfolio. But these and other comparison tools make all that work unnecessary.
Now, with just a few clicks and a little patience, you and your computer can zero in the best funds for you to buy, and sell, to enhance your success in the market.