A fund family is a mutual fund company that offers a variety of mutual funds: stock, money market, bond, and so on. There are hundreds of fund families, and you are probably familiar with some of the largest ones: Fidelity, Vanguard, T. Rowe Price, and Janus.
It is reasonable to expect that the funds you are interested in regularly outperform industry benchmarks. Some investors prefer to make all their investments within the same fund family so that they can easily move their money from one fund to another and receive consolidated statements on all their fund holdings.
Many brokerage companies and fund families also offer mutual fund supermarkets, where you can purchase funds from several fund families from one outlet and receive consolidated statements. However, these supermarkets may offer different benefits than an individual fund family.
issues to consider
Before you sign up with a particular fund family, here are some issues you should consider:
- Does the family offer all the types of funds you want for your portfolio? Some fund families are small and your choices are limited.
- Are the funds in the family outperforming industry benchmarks? It wouldn't be fair to expect that every fund outperform its category for the one-, three-, and five-year total return periods. However, it is reasonable to expect that at least the funds you are interested in regularly outperform industry benchmarks, such as the Standard & Poor's 500 index.
You can expect that any fund family at any time will have some stellar performers and some underperformers.
- What are the fund families' fees and expenses and how do they compare with those at other fund families? Compare the fees imposed by one fund family with fees at fund families offering similar funds. Although there are a great variety of charges to consider, such as loads, expense ratios, and 12b-1 fees, you can use Morningstar reports to get a standard presentation of fees.
Learn more about mutual fund families:
T. Rowe Price
more issues to consider
- What options does the family offer? Most fund families offer automatic investing, reinvesting, and withdrawal. A fund family should also offer easy exchanges between funds in case your investment objectives change.
Many fund families don't charge a fee for exchanging your shares from one fund to another; some charge a minimal fee. Others restrict the number of times you can switch from one fund to another in one year.
However, don't forget that, for tax purposes, exchanging or switching to a different fund is a sale and can carry tax implications unless your fund is held in a tax-sheltered account.
Funds typically offer online services to investors with Internet access.
- What is the fund family's reputation for customer service? You deserve to have your transactions with a fund family handled promptly, accurately, and courteously. When you call, will you be put in voice-mail purgatory or is there a human being answering the phone? Many magazines, newspapers, and websites carry information about fund company customer service responsiveness.
- Is there overlap in the fund family's holdings? You should look carefully at the holdings in your funds. Even though you are invested in Growth Fund S and Growth Fund T, you may be surprised to find that both funds have many of the same companies in their portfolios.
If this is the case, you may end up paying the fees and expenses associated with owning two funds. You will also lose out on the benefits of diversification if you own two or more funds with similar holdings. Be aware of overlap that may be occurring in all the funds you own.
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Neither CUNA nor the author of this article is a registered investment adviser. Readers should seek independent professional advice before making investment decisions.