Guide to mutual fund categories
These tables rank the top-performing stock and bond mutual funds for the third quarter of 2008 for each of the main investment categories as defined by research firm Morningstar Inc., which provided the data for these tables. The tables of top-performing funds are followed by individual performance figures for 5,400 mutual funds, organized by fund company.
Stock funds
Most of the mutual funds that invest in the stocks of U.S. companies are sorted by Morningstar into nine broad categories. First, the funds are categorized by the average market capitalization (or “cap”) of the stocks they own: large-cap, mid-cap or small-cap. (A stock’s capitalization is its share price times the number of shares outstanding.)
The funds are further categorized by their basic investment objective: growth, value or a blend of the two. Among other criteria, growth-oriented funds tend to focus on stocks of companies that have, or are expected to have, robust earnings growth. Value funds look for stocks that appear to be underpriced relative to the underlying value of the company.
In the tables, these broad categories are identified as large-cap growth (LG), mid-cap growth (MG), small-cap growth (SG), large-cap blend (LB), mid-cap blend (MB), small-cap blend (SB), large-cap value (LV), mid-cap value (MV) and small-cap value (SV).
Stock funds that invest more than 80% of their assets in foreign stocks are subdivided into five categories: foreign large-cap value (FV), foreign large-cap blend (FB), foreign large-cap growth (FG), foreign small/mid-cap value (FA) and foreign small/mid-cap growth (FR).
Other stock funds are categorized as follows:
* Specialty funds: These invest primarily in companies within a single industry or sector. The specialty categories are: communications (SC), financial (SF), health (SH), natural resources (SN), precious metals (SP), real estate (SR), technology (ST) and utilities (SU).
* Bear market (BM): These funds use strategies, such as short-selling and put options, specifically designed to profit from falling stock prices.
* Moderate and conservative allocation (MA and CA): This category includes funds that invest in a mix of stocks, bonds and cash. Conservative-allocation funds have at least 20% of their assets invested in stocks and 50% to 80% invested in fixed-income securities and cash. Moderate-allocation funds have 50% to 70% of their assets invested in stocks and more than 10% invested in fixed income.
* Convertibles (CV): These funds invest in bonds and preferred stocks that can be converted to common stocks.
* World (WS): These funds invest 40% to 80% of assets in foreign stocks and 20% to 60% of assets in U.S. stocks.
* World allocation (IH): This category invests in a mix of stocks and bonds, of which at least 40% is foreign.
* Europe (ES): At least 80% of assets are invested in Europe.
* Pacific/Asia (PJ): At least 70% of assets are invested in Pacific Rim countries, with less than 10% invested in Japan.
* Japan (JS): At least 75% of assets are invested in Japan.
* Diversified emerging markets (EM): At least 50% of assets are invested in emerging markets -- generally defined as fast-growing economies.
* Latin America (LS): At least 75% of assets are invested in Latin America.
* Diversified Pacific/Asia (DP): At least 40% of assets are invested in Pacific Rim countries, with an additional 10% or more invested in Japan.
* Long-short (LO): These funds take long positions in stocks deemed attractive and short positions in securities considered likely to decline.
* Target-date 2000-2014 (TA): Geared to investors expecting to retire any time from 2000 to 2014.
* Target-date 2015-2029 (TB): Geared to investors expecting to retire any time from 2015 to 2029.
* Target-date 2030+ (TC): Geared to investors expecting to retire in 2030 or beyond.
Bond funds
Bond funds are broadly divided based on how their dividends are taxed. The interest from taxable bond funds is subject to federal income tax, while the interest from municipal bond funds is generally exempt from federal -- and sometimes state -- income taxes. Within these broad groupings, bond funds are categorized as follows:
* Long-term government (GL): At least 90% of the bond portfolio is invested in U.S. government issues with an average effective duration of more than six years. A bond’s duration largely depends on its time to maturity.
* Intermediate-term government (GI): At least 90% of the bond portfolio is invested in U.S. government issues with an average effective duration of at least 3 1/2 years but less than six years.
* Short-term government (GS): At least 90% of the bond portfolio is invested in U.S. government issues with an average effective duration of at least one but less than 3 1/2 years.
* Long-term investment grade (CL): Focused on corporate and other investment- grade securities with an average effective duration of more than six years.
* Intermediate-term investment grade (CI): Focused on corporate and other investment-grade securities with an average effective duration of more than 3 1/2 years but less than six years.
* Short-term investment grade (CS): Focused on corporate and other investment-grade securities with an average effective duration of more than one but less than 3 1/2 years.
* Ultra-short-term (UB): These funds invest in fixed-income securities with an effective duration of less than one year and can focus on corporate or government bonds.
* Bank loan (BL): Formerly included in the “ultra short” category, these funds invest primarily in syndicated bank loans.
* High yield, or “junk” (HY): At least 65% of assets are invested in bonds rated below BBB, which are considered speculative.
* Multi-sector (MU): This category invests in several fixed-income sectors, such as U.S. government, foreign, corporate and high-yield.
* International (IB): At least 40% of bond assets are invested in foreign markets.
* Emerging markets (EB): These funds primarily invest in bonds issued by governments and companies in emerging markets.
* High-yield muni (HM): At least 50% of assets are invested in municipal securities that are rated at BBB or below or are not rated.
* Muni national long-term (ML): Invested primarily in municipal bonds with an average effective duration of more than seven years.
* Muni national intermediate term (MI): Invested primarily in municipal bonds with an average effective duration of at least 4 1/2 years but less than seven years.
* Muni national short-term (MS): Invested primarily in municipal bonds with an average effective duration of less than 4 1/2 years.
* Muni California long-term (MC): At least 80% of assets are in long-term California tax-free bonds.
* Muni California intermediate-term (MF): At least 80% of assets are invested in intermediate-term California tax-free bonds.
* Muni single-state long-term (SL): Invested primarily in long-term, single-state municipal bonds.
* Muni single-state intermediate-term (SI): Invested primarily in intermediate-term, single-state municipal bonds.
* Inflation-protected (IP): This category provides returns that rise with the rate of inflation.
Abbreviations
The Pct. Load column lists sales charges (known as loads) or commissions; NL means “no load.” The Exp. Ratio column is the annual percentage of the fund’s assets paid for operating and management expenses, excluding sales charges. NA means “not applicable,” usually because the fund was not in existence long enough.
For more information on footnotes and an explanation of fund return figures and ratings, see the “How to read the mutual fund tables” box on this page.
