The Best Just Got Better
The interest in mutual funds has expanded immensely since BUSINESS WEEK introduced the Mutual Fund Scoreboard in 1986. The amount of money invested in mutual funds has increased fourfold, to $2 trillion. The number of funds we cover in the three consecutive Scoreboard issues of the magazine has risen to 1,560, from 385 eight years ago. Under the savvy guidance of Associate Editor Jeffrey M. Laderman, our Scoreboard editions have become more popular as well. Our Scoreboard, with help from Morningstar Inc., was among the first to rate funds systematically, not only by their increase in value but also by how much risk they took to achieve those increases. Our approach has won acclaim by mutual-fund professionals as well as readers. Last year, Securities Industry Management magazine rated our Scoreboard the highest against competition that included a variety of business and finance publications. In particular, BUSINESS WEEK received "high marks for being an innovator."
We've got more innovations for you this year. With tax rates up, people need more information on how taxes affect their investments. So we now calculate not only pretax but also aftertax returns on equity mutual funds. Another important tax implication is the amount of stock appreciation, or capital gains, in the fund's portfolio. An investor might get hit with a tax liability if the fund takes the gains by selling the stock. A new column in our Scoreboard measures these yet untaxed gains.
These aren't the only new features. We go beyond typical growth and income descriptions of a fund's objective to characterize funds by their portfolios. Do they emphasize large- or small-capitalization stocks? Do they buy hot growth companies with high price-earnings ratios or out-of-favor outfits with low p-es? The findings can help investors decide whether the fund's style is also theirs.
This is only the beginning of this year's review of mutual funds. In the weeks to come, we will be looking at bond funds and closed-end funds. If you would like to sort through all this by computer, you can get the BUSINESS WEEK Mutual Fund Scoreboard on diskette by calling 1-800-553-3575. This spring, watch for our annual BUSINESS WEEK Guide to Mutual Funds, which compiles the various scoreboards into one book, with basic mutual-fund investing guidelines. Get your start sizing up the funds on page 72.