BITS > JUNE 2006

Free online screening tools make finding and ranking mutual funds a day at the beach. Amy Crane describes some of the better screening resources and features.

Three Mutual Fund Screens

Looking for a good fund is like sifting through grains of sand on the beach. Not only are there thousands of them, each with its own objectives, costs, and track record, but fund companies and financial advisors also compete against each other, touting favored funds in print, on the Web, and on TV. Fortunately, free screening tools on the Web help dig you out of this sand pit and find funds for the long term.

Sifting Through Fund Criteria

Screening tools offer a bewildering variety of criteria, ranging from the important to the inane. When using a screen to find funds, focus on key criteria, ignoring the others altogether. For example, if you're looking for funds for long-term growth, use measures such as three, five, and ten-year total return, manager tenure, turnover, loads, and costs. If you're trying to choose funds for your 401(k) plan, use a screening tool that includes a filter for fund family so you can evaluate only the fund families available in your 401(k) plan. Avoid screening for short-term or year-to-date performance as these melt away as fast as last winter's snow.

Most personal finance and financial sites offer screening tools. The best free screens provide options for all the essential criteria. Most personal finance sites enable you to enter criteria to fit your needs. Many also offer predefined screens built by fund analysts. Screening tools draw on data from different services, such as Morningstar, Standard & Poor's, Value Line, and Lipper. However, the fund companies are the source of the data, so the information is virtually identical from one provider to another.

The following free screening tools feature industrial-strength capabilities that help you hone in on important variables.

Morningstar

The best-known fund site on the Web, Morningstar.com, offers a clear, crisp screening tool that includes all the important variables. For return criteria, you can input criteria or screen for results against the S&P 500 index or category averages. If you're new to screening, select from five predefined starter screens designed by Morningstar analysts:

• Long-term winners
• Solid small-growth funds
• Standout foreign stock funds
• Conservative bond funds
• Little funds with big returns

Click on the little yellow light bulb next to each criterion, and a new window pops up with a short explanation.

Morningstar's Premium Members have access to a more powerful fund screener. It's an unfortunately well-kept secret that BetterInvesting members get a nice discount when they sign up as Morningstar Premium members.

Yahoo! Finance

The Yahoo! Finance website provides a well-organized screening tool built around five overall criteria: overview, ratings, performance results, and purchasing/fees. Like the Morningstar tool, you can screen for Morningstar ratings, return ratings, and risk ratings. The Yahoo! Finance screen has one advantage over Morningstar: it enables you to pick minimum and maximum criteria in these areas. Specialized criteria allow you to screen for fund asset size and median market capitalization, so you can avoid bloated funds and select funds investing in large, medium or small companies.

Better Investing Standard & Poor's (S&P) Mutual Fund Data Service & Online Analysis Tools

I can't finish this article without touting the BetterInvesting screening tool. While it does lack some of the powerful capabilities of other screens on the Web, what it does do is emphasize BetterInvesting's mutual fund selection criteria, so it is pretty simple. And simple is good because sometimes the screening tools with more capabilities can be overwhelming if you're not sure what you're looking for.

The BetterInvesting service is available to members who chose the mutual fund option or add it on to their S&P Stock Data Service option (formerly Online Premium Services or OPS). The tool allows you to screen for BetterInvesting variables including:

• Five Year Sales Growth
• Five Year EPS Growth
• Manager Tenure
• Five Year Average Turnover Rate
• Expense Ratio
• Minimum Purchase
• Average Duration for Bond Funds
• Average Credit Quality for Bond Funds

Best of all, you can get right into the BetterInvesting Mutual Fund Tools from your screening results. These tools enable you to evaluate, compare and track stock, bond, balanced and mutual funds over time.

Amy Buttell Crane, a free-lance writer based in Erie, Pa., writes about mutual funds for BetterInvesting Magazine Amy is the author of the second edition of BetterInvesting's Mutual Fund Handbook. She also has taught stock and fund investing classes.