Question

Value Core/Blend Growth Which funds would typically considered for performance comparisons? Equity Fund 1 Equity Fund 2 Equity Fund 3 Equity Fund 4 Why does Morningstar group funds in categories as shown What is an example of a difference between an open end mutual fund and an ETF? Which fund structure will typically be targeted by vulture investors?

Answer 1

Morningstar groups funds into categories so as to make it easy for the investors in determining how an investment fits into a particular investment portfolio from an asset allocation perspective. It can also be used to find a fund for each category, or on specific areas/sectors. It is also useful over the long term, where historical style box data can be used to verify the consistency of a portfolio's holdings.

For comparison purpose, Funds mostly falling under Large Capitalization box for valued and Core/Blend categories would primary indicate the volatility of he market, and the direction of the Security prices and value compared to each other, and with Index securities.

Open Ended Funds are the Funds which are open to the Investors for Investment purpose every time. Investors can put and withdraw their investments in these funds at any point of time.

Exchange Traded Funds (ETFs) are the Funds which are traded on the Stock Exchanges.

Vulture Investors look for the cheapest, most troubled funds/securities, giving desperate sellers an opportunity to exit. The investors get a chance to profit — from other peoples’ disasters. So in Morningstar Equity Box Model, they will probably look for Blend Large Cap. & Valued Mid Cap. funds.