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Fund Spy

Blurred Lines for Funds a Mixed Blessing for Investors

Pushing against borders allows more freedom and choice but complicates selection and evaluation.

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Placing mutual funds into distinct asset classes and categories has obvious benefits. Without dividing funds into groups, performance rankings would be of limited use, as bond funds would be compared with stock funds, and small-cap funds with those that focus on multinationals. A top-quartile ranking might mean a fund had enjoyed investment success, or just that its slice of the market had been in favor.  

The problem is, not all funds fit neatly into a group. That's not new: For instance, many managers who use a moderately value-oriented stock-picking approach have long produced portfolios that tend to land around the border between value and blend. In recent years, though, fund companies have created many funds that by design challenge the existing classifications.

Gregg Wolper has a position in the following securities mentioned above: UL. Find out about Morningstar’s editorial policies.

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