On-line screening of mutual funds and ETFs: minimum requirements
In this article, The Skilled Investor discusses minimum requirements for on-line mutual fund and ETF screening tools. This article summarizes our seven scientifically based fund selection criteria and reports on our survey of the capabilities of free on-line website tools to do screens using these criteria.
Automated fund screening tools should not make any arbitrary decisions for you about which funds you will use to pursue your investment objectives.
An automated screening tool should simply winnow down a larger field of contenders to a smaller and more manageable list. It should screen funds for you only in the manner that you want it to screen funds. You should not compromise your screening process by using tools that do not allow you to do what you want to do.
Once you have your smaller, screened list of funds, you can investigate remaining funds in greater depth. Once you are satisfied with one or several funds that meet your investment criteria, then you can invest directly by downloading, completing, and mailing in investment account forms with your check. Alternatively, you can call a fund’s 800 number, if you need a little help to set up your account and make your investment. (IRA accounts are more complex than regular taxable investment accounts, so making a call to a fund’s IRA department can be a very good idea to make certain you have the right forms and have completed them properly.)
The only cost to you of buying mutual funds directly is your personal time and effort. However, the savings value can be huge over your lifetime, if you buy funds directly and cut out costly sales agents in the middle.
Note: If you want to understand how much you personally could waste by paying excessive investment costs over your lifetime, see this article about VeriPlan. Across your lifecycle, VeriPlan automatically projects the full value of the personal assets you could lose to the five main types of investment costs. VeriPlan develops projections that assume you will continue to invest at the same level of cost-efficiency or cost-inefficiency associated with your current financial asset portfolio. Alternatively, VeriPlan’s automated Cost-Effectiveness Tool lets you compare investment costs that you believe are more reasonable to pay versus the investment costs of your current portfolio.
Functional requirements for automated mutual fund screening tools are necessarily more stringent than for [...]