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Anyone aware of a good site to compare mutual funds for overlap?
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Morningstar.com is a good site to get some basic information. -
Anyone aware of a good site to compare mutual funds for overlap?
Morningstar is the gold standard. We have a paid subscription but it's amazing what you can get from them for free. Try their instant X-ray tool and you might want to read this article on avoiding overlap.My passion is protecting clients and others from predatory and ignorant advisors 270-247-6087 for CPA clients (we are Flat Fee for both CPA & Fee-Only Financial Planning)
Johanna Fox, CPA, CFP is affiliated with Wrenne Financial for financial planning clientsComment
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I'm having trouble understanding how morning star X-ray works. For example, in one of our cash balance plans the we have multiple hi yield bond funds. For example we have JP Morgan high yield I, OHYFX, and lord abbet high yield F, LHYFX, Mainstay high yield corporate bond I, MHYIX.
What is he difference between all these redundant sounding funds?
Looks to me like there is needlesss complexity
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I’m having trouble understanding how morning star X-ray works. For example, in one of our cash balance plans the we have multiple hi yield bond funds. For example we have JP Morgan high yield I, OHYFX, and lord abbet high yield F, LHYFX, Mainstay high yield corporate bond I, MHYIX.
What is he difference between all these redundant sounding funds?
Looks to me like there is needlesss complexity
What do you want from them?
Most on here seem to be hardcore indexers where the only things that matter are r² (correlation to the index), turnover (as close to zero as possible), and ER (expense ratio; basically the annual fee).
Most on here would probably also tell you to ignore high-yield bond ("junk") funds and try to earn with equities instead; leave the capital preservation and fixed-income characteristics to "bondier" bonds.
Otherwise you want all the return with as little risk as possible. This is usually expressed by alpha (return relative to index), beta (volatility relative to index), and various assessments of risk-adjusted return (Sharpe ratio, Treynor ratio, Sortino ratio).
Sharpe is the return minus benchmark over standard deviation. Zero means it hit the benchmark exactly, so you want it to be positive. The more it beats the index, and the lower its standard deviation (the less volatile, p much), the higher the ratio will be. A good index fund will be almost exactly zero since it should match the benchmark.
Treynor is return minus "risk-free rate" over beta. The risk-free rate is usually of a treasury bill. You'd expect a Treynor to be higher than the Sharpe for p much all classes, because most benchmark indices earn more than T-bills (that's the point).
Sortino acts a bit differently, as it uses the square root of the semi-variance (from points below the mean) to try to get into downside performance to weed out when everything else is also doing poorly, and uses a "target rate of return" instead of the benchmark to adjust for it.
...clear as mud, right? And that just shows the past. Sure, a fund with low beta and positive ratios looks great, but is it what you need in your portfolio, and will it out-perform the index in the end? Data thus far says "no."
Be aware that those funds are assessed usually by the benchmark of those funds. For instance, those stats are done versus the Barclay's US Aggregate index. Since junk bonds act very differently than, say, high-quality government or corporate bonds, you wouldn't expect similar numbers from them.
tl;dr: stick to r² and ER.Comment
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I was just trying to figure out if all this complexity was necessary. There is no point in having fidelity Schwab and vanguard total stock market funds. Redundancy is not helpful and just adds needless complexity. I was wanting the tool to tell me these funds are 99% similar or they track the same indices and are interchangeable etcComment
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Where do you have your accounts? I use Schwab and they have a lot of good research tools and access to other reports. I'm sure other banks/investing services do as well. If you are looking for a good managed low/no cost way to diversify, I highly recommend Schwab's Intelligent Portfolio. It's a robotic investor, kind of like Wealthfront or Betterment, but uses Schwab's own ETF's.Comment
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Jason, I have two suggestions for you:
1. Think of your portfolio like a puzzle: There are specific openings that you want to fill, and you just need one piece to fill each of those openings. That's why so many people talk about a three-fund portfolio. If you really want a simple, set-it-and-forget-it portfolio, you could just buy three index funds: a domestic U.S. equity fund, an international equity fund and a domestic bond fund, and you would just need one of each. Not only does this make it easy to manage your investments, and keep your costs lower, but it also allows you to sidestep the need to check for overlap.
2. That said, I can think of one case in which you might own two different funds that track the same index (e.g., two different S&P 500 index funds): If your brokerage firm provides commission-free trades on certain lines of funds but not others. At Schwab, for example, it's free to buy a Schwab branded S&P 500 mutual fund, but they'll charge you a commission to buy a Vanguard fund. Same thing applies at the other large firms that each have their own line of nearly-identical index funds.
Best of luck.Comment
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I was just trying to figure out if all this complexity was necessary. There is no point in having fidelity Schwab and vanguard total stock market funds. Redundancy is not helpful and just adds needless complexity. I was wanting the tool to tell me these funds are 99% similar or they track the same indices and are interchangeable etc
Doesn't sound like it. It sounds like a "collector" type portfolio, often put together by a loaded mutual fund salesman masquerading as a financial advisor.Helping those who wear the white coat get a fair shake on Wall Street since 2011Comment
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Doesn’t sound like it. It sounds like a “collector” type portfolio, often put together by a loaded mutual fund salesman masquerading as a financial advisor.
Agreed! All to often, I see portfolios where the advisor sold to just under the price breakpoint for one fund family and then added a very similar fund from another fund family, so their commission would not be reduced. When shenanigans like that happen, it's another black-eye for my industry and another reason why every advisor should be held to a fiduciary standard.Comment
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