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Are Your Stock Funds Performing?

By Doug Fabian
President, Fabian Investment Resources
Host, The Doug Fabian Show

Mutual fund categories are confusing and Wall Street likes it that way. Why? Because the less you understand, the more help you need -- from the financial press, the investment firms and the brokers. But I'm going to make it easier for you right here. In fact, I'm going to break it down into plain English. 

If you do not know what category your "emerging opportunities" or "social equity" or "income and growth" fund falls into, check the fund's profile at Yahoo Finance. You can also look at your prospectus or call the fund company itself. 

Large-Cap Growth (LCG). These are funds that hold the stock of big, huge, monstrous corporations -- companies that are typically worth more than $5 billion smackers. That's the large-cap part. What's more, a large-cap growth fund concentrates on companies that are expected to earn more and grow faster than others in the same industry. That's the growth part. (Think Cisco.) 

Large-Cap Value (LCV). Once again, were talking about big, mammoth, conquer-the-world companies. That's the large-cap portion. But this time, the fund manager is focusing on mature corporations with consistent earnings that the investing public is overlooking; the stock may be viewed as a bargain. That's the value part. (Think Coca-Cola.) 

Large-Cap Core or Large-Cap Blend (LCC). Funds that, by portfolio practice, are investing the majority of cash in huge corporations. But now, you're giving them the flexibility to go after rapid-fire earners or beaten-down bargains. 

Small-Cap Growth (SCG). These are funds that hold the stock of companies you've probably never heard of. But that's okay... these aren't fly-by-night operations. Small-cap companies are typically worth less than $1 billion. A small-cap growth fund acquires the stock of corporations that are supposed to earn more and "get bigger" before other companies in the same industry. 

Small-Cap Value (SCV). Once again, the fund is investing in companies that you don't necessarily know. This time, however, fund managers are looking for small corporations that aren't necessarily trying to become the next Microsoft, but have proven themselves over time as steady, reliable providers. They are the bargain stocks of the smaller companies in, perhaps, smaller industries. 

Small-Cap Core or Blend (SCC). Funds that, by portfolio practice, invest at least 75% in smaller companies. Yet the fund manager has the freedom to pursue big-time bargains or warp-speed revenue generators.

Mid-Cap Growth (MCG). These are funds that invest at least 75% in mid-sized companies. If a Ford Escort is a compact car, and the Ford Explorer is a huge SUV, now we're talking about the mid-sized Ford Taurus. And again, the "growth" part of a mid-cap growth fund is looking at organizations with earnings that are expected to outpace, outgrow and outperform others in the same industry. (Mid-cap companies are those that the stock market values between $1 billion and $5 billion smackers.)

Mid-Cap Value (MCV) Same mid-sized companies, but these fund managers look for stocks they believe are undervalued, oversold, misunderstood and unjustly overlooked.

Mid-Cap Core or Mid-Cap Blend (MCC). Again, funds that invest at least 75% in mid-sized companies, but now you've handed the keys to your Taurus to the fund manager to go after beaten-down bargains or jet-setting, ultra-speedy earners.

Multi-Cap Growth (MLG). Funds that, by portfolio practice, invest in a hodge-podge of big, medium and small-sized companies, using the "growth" style of investing; that is, the fund managers pursue companies that are expected to outgrow and outearn industry rivals.

Multi-Cap Value (MLV). Fund managers are looking to acquire bargain stocks of any sized company -- stocks with below-average p/e ratios and below-average growth figures.

Multi-Cap Core or Blend (MLC). In a nutshell? Anything goes. Big, small, shapely, comely, mid-sized, right-sized, rapid earner, blue light special -- it doesn't matter. Does the fund manager like the company or not.

For a score card for multi-caps, click here. 

Equity Income (EI). Funds that, by portfolio practice, seek relatively high income by investing 65% or more in dividend-paying securities. 

Global (GL). A fund that invests at least 25% in securities trade outside the good ol' U.S. of A. May own U.S. securities as well.

International (INTL). A fund that invests its assets in securities with primary trading markets outside of the United States.

Emerging Markets (EM). "Emerging market" means a country's economic output is... well... still kinda small, but supposedly growing very fast. Dangerous prospect, indeed.

Flexible Portfolio (FX). Talk about names that deceive the eye with special effects. This one invests in different assets (stocks, bonds, fixed-income) and company sizes (big, medium, small) with its own unique philosophy.

Science & Technology (ST). You need to ask? 65% of its equity portfolio in science and tech stocks.

Balanced (BAL). Asset allocating, principal-conserving fund with a stock/bond ratio around 60%/40%.

If you'd like to compare your fund against its category average, the scoreboard can be found right here. Plus, we've got the brand new Fabian Lemon List, where you can identify the worst performing, most horrendous, mutual funds in existence. Don't get stuck in a lemon!

Doug Fabian is president of Fabian Premium Investment Resource and editor of the company's four subscription-based newsletter products. For more information on these services and the highly rated Fabian Plan, including how it can help you attain your goals of growth and income using today's best no-load mutual funds, visit the Fabian web site at http://www.fabian.com/.