Guide to Mutual Fund Categories
These tables rank the top-performing stock and bond mutual funds in the second quarter for each of the main categories defined by research firm Morningstar Inc., which provided the data. The tables of the best performers are followed by individual results for 5,400 mutual funds, organized by fund company.
Most 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 of the stocks they own: large-cap, mid-cap or small-cap. (A stock’s capitalization is its share price multiplied by the number of its outstanding shares.)
The funds are further arrayed by their basic investment objective: growth, value or a blend of the two. Among other criteria, growth-oriented funds 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 shares 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: 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): Uses strategies, such as short-selling and put options, designed to profit from falling stock prices.
* Moderate and conservative allocation (MA and CA): Includes funds that invest in a mix of stocks, bonds and cash. Conservative-allocation funds have at least 20% of their assets in stocks and 50% to 80% in fixed-income securities and cash. Moderate-allocation funds have 50% to 70% of their assets in stocks and more than 10% in fixed-income.
* Convertibles (CV): Invests in bonds and preferred stocks that can be converted to common stocks.
* World (WS): Invests 40% to 80% of assets in foreign stocks and 20% to 60% of assets in U.S. stocks.
* World allocation (IH): Invests in a mix of stocks and bonds, with at least 40% in foreign assets.
* Europe (ES): At least 80% of assets invested in Europe.
* Pacific/Asia (PJ): At least 70% of assets invested in Pacific Rim countries, with less than 10% invested in Japan.
* Japan (JS): At least 75% of assets invested in Japan.
* Diversified emerging markets (EM): At least 50% of assets invested in emerging markets, generally defined as fast-growing economies.
* Latin America (LS): At least 75% of assets invested in Latin America.
* Diversified Pacific/Asia (DP): At least 40% of assets invested in Pacific Rim countries, with at least an additional 10% invested in Japan.
* Long-Short (LO): Takes “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 between 2000 and 2014.
* Target-Date 2015-2029 (TB): Geared to investors expecting to retire between 2015 and 2029.
* Target-Date 2030+ (TC): Geared to investors expecting to retire in 2030 and beyond.
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 bond portfolio invested in U.S. government issues with an average effective duration of more than six years.
* Intermediate-term government (GI): At least 90% of bond portfolio invested in U.S. government issues with an average effective duration of at least 3.5 years but less than six years.
* Short-term government (GS): At least 90% of bond portfolio invested in U.S. government issues with an average effective duration of at least one but less than 3.5 years.
* Long-term investment grade (CL): Focuses on corporate and other investment-grade securities with an average effective duration of more than six years.
* Intermediate-term investment grade (CI): Focuses on corporate and other investment-grade securities with an average effective duration of more than 3.5 but less than six years.
* Short-term investment grade (CS): Focuses on corporate and other investment-grade securities with an average effective duration of more than one but less than 3.5 years.
* Ultra-short-term (UB): Invests in fixed-income securities with an effective duration of less than one year. Includes corporate and government bond funds.
* Bank loan (BL): Formerly included in the ultra-short category, these funds invest primarily in syndicated bank loans.
* High-yield (junk) (HY): At least 65% of assets invested in bonds rated below BBB (considered speculative).
* Multi-sector (MU): Invests in several fixed-income sectors, such as U.S. government, foreign, corporate and high-yield.
* World (IB): At least 40% of bond assets invested in foreign markets.
* Emerging markets (EB): Primarily invests in bonds issued by governments and companies in emerging markets.
* High-yield muni (HM): At least 50% of assets invested in municipal securities that are rated BBB or below or are not rated.
* Muni national long-term (ML): Invests primarily in municipal bonds with an average effective duration of more than seven years.
* Muni national intermediate-term (MI): Invests primarily in municipal bonds with an average effective duration of at least 4.5 but less than seven years.
* Muni national short-term (MS): Invests primarily in municipal bonds with an average effective duration of less than 4.5 years.
* Muni California long-term (MC): Invests at least 80% of assets in long-term California tax-free bonds.
* Muni California intermediate-term (MF): Invests at least 80% of assets in intermediate-term California tax-free bonds.
* Muni single-state long-term (SL): Invests primarily in long-term, single-state municipal bonds.
* Muni single-state intermediate-term (SI): Invests primarily in intermediate-term, single-state municipal bonds.
* Inflation-protected (IP): Provides returns that fluctuate with the rate of inflation.
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 is too young. 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.
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