Markets & Strategies

Why — and How — to Use a Mutual Fund Screener

This easy-to-use tool can help you choose a mutual fund that matches your portfolio's needs.

by Mark Tosczak - February 12, 2018

Mutual funds allow you to buy a basket of securities in a single investment, which takes some of the work out of investing and makes it easier to diversify your portfolio. The only problem? There are a lot of mutual funds to choose from — almost 10,000 in the United States alone — which makes it tough to choose the right handful of funds for your investment portfolio.

The solution? A mutual fund screener, such as the Wells Fargo Mutual Fund Screener, which allows investors to search and sort among thousands of mutual funds so they can be educated about and select appropriate options.

“Ultimately, the goal is to find a mutual fund that is a best fit for your needs. For investors who work with a Financial Advisor but also like to explore investments independently, screeners can be a helpful collaboration tool. For investors who maintain their portfolios independently, mutual fund screeners offer education and easy-access comparison shopping,” says Julie Patin, Vice President, Product Manager with Wells Fargo Advisors.

How it works

The Wells Fargo screener is open to anyone, and makes it easy to sort through data. Investors can filter available mutual funds by several criteria, including type of fund, fund family, and fees.

“Fees are one of the key things that a client should look at,” Patin says. “The more money you can invest vs. paying fees, the harder that money is going to be working.”

To that end, the screener allows investors to choose load or no-load funds. A “load” is a percentage charged to an investor when shares in the mutual fund are bought or sold. Mutual funds may also charge transaction fees, which cover costs involved in buying and selling securities within the fund’s collection of assets.

Investors using the screener can also see what a mutual fund’s expense ratio is — the percentage of a fund’s assets that are charged to investors each year to cover fund expenses such as management fees and operating costs.

The screener also provides data on other criteria for evaluating mutual funds, including the fund’s Morningstar performance rating, how long it’s been managed by its current manager, and risk measurements, such as the fund’s alpha and beta.

Alpha: Alpha measures the difference between a portfolio’s actual returns and its expected performance, given its level of risk as measured by Beta. Alpha combines the volatility the portfolio’s price has experienced relative to the market and the returns the fund has generated relative to the market, to define the “excessive risk” of the fund. A negative Alpha means a portfolio has underperformed its index relative to how much volatility has been shown.

Beta: Beta is a quantitative measure of the volatility of a given stock, mutual fund, or portfolio, relative to the overall market, usually the S&P 500®. Specifically, the performance the stock, fund, or portfolio has experienced in the last five years as the S&P moved 1% up or down. A Beta above 1 is more volatile than the overall market, while a Beta below 1 is less volatile.

Once you’ve narrowed down the mutual fund choices to a handful, the screener allows you to select as many as three funds to compare side-by-side. Clients of Wells Fargo Advisors can buy mutual funds directly from their accounts.

Pre-selected choices 

Some investors may not want to dive into all the details. For them, the Wells Fargo Advisors Mutual Fund Screener provides the WellsTrade® Mutual Fund Screened List.

The funds on this list are no-load funds screened on a handful of criteria, such as being open to new investors, having at least $100 million in assets under management, and having managers with at least three years’ tenure.

Patin emphasizes that this kind of pre-selected list isn’t meant to be a recommendation, but can be useful for some investors, particularly those new to investing who aren’t sure where to begin.

In the end, while the screener is a great way for anyone to gather information to help make an informed purchase decision, it is not a substitute for professional advice. Investors still need to consider their goals, risk tolerance, and other factors when choosing mutual funds.

“You really have to take a look at your own risk tolerance,” Patin says. “What is your time horizon? What are your liquidity needs? What am I going to be using this investment for? It’s really a personal decision.”

Mark Tosczak has spent 25 years wrangling words for newspapers, magazines, businesses, nonprofits, and other organizations. He focuses on health care, science, and business.

Additional Resources

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Mutual funds are sold by prospectus. Please consider the investment objectives, risks, charges and expenses carefully before investing. The prospectus, and, if available, the summary prospectus, which contains this and other information, can be obtained by calling your financial advisor. Read the prospectus and, if available, the summary prospectus carefully before you invest.

WellsTrade brokerage accounts are offered through Wells Fargo Clearing Services, LLC.