All in the Family - Black Enterprise

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Black Enterprise Magazine September/October 2018 Issue

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An oft-quoted maxim is that you can’t choose your family. That may be true-unless you’re picking a mutual fund.

In an era when everything from retirement plans to passbook savings replacements have pushed money inflows into these vehicles to record levels, the selection process can be daunting. How can one possibly make the right match among the 7,000 or so funds that are out there?

You might want to get started by looking at mutual fund families, companies that operate a constellation of funds. At most, there are roughly 200 such clans to evaluate, making the task less onerous. You see, the beauty of the process is that you can structure your asset allocation mix at one company since you can choose from an array of stock, bond and sector funds.

The advantages: your portfolio can be reported on a single statement from the family that you select. Moreover, most allow you to engage in dollar-cost averaging-a strategy in which you commit to investing a set amount of money in the fund each month and, as a result, gain the flexibility of buying more shares when prices go down and fewer shares when prices go up. With the erratic stock market, such moves will help you make significant gains through buying more stocks during periodic dips.

However, Craig Evans Carnick, of Carnick & Rainsberger, a Colorado Springs, Colorado-based financial advisory firm, says investors should be mindful that many such families impose “loads”-those sales charges that can take a sizable bite out of your return. However, they permit you to make fund switches easily and without paying a new commission each time. Asserts Carnick: “Even with a family of load funds you shouldn’t switch too often because you’re generating a taxable gain or loss with every trade.”

Also note that even though most families share a common investment philosophy-ranging from value investing to scouting growth prospects-the style of each portfolio manager may differ.

The question then becomes, how do you get started? Naturally, you’ll want a top-flight collection so it will pay to closely examine the performance of funds within each family. But ranking fund families goes beyond consideration of past performance. Look at whether the fund has knowledgeable representatives; a range of services; online access; readable account statements and comprehensive investment information.

To help you with your search, be has compiled a number of screens. We have looked at families based on asset size and annualized total returns.

At our request, Wiesenberger, a Rockville, Maryland mutual funds tracking company, reviewed fund family performance during 1998, concentrating on the 10 largest groups in terms of total assets. Here, the approach was to determine what percentage of a family’s funds beat the category averages. For instance, a domestic stock fund that returned 10% would be a minus because of their relative performance to S&P’s return of 25%. The objective is for you to create a master portfolio of winners in each category.

Boston-based Financial Research Corp. (FRC), on the other hand, ranked fund families by their 12-month performances. Results were

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