This group includes funds that restrict investment to a certain group of investors. Sometimes, the restriction is based on religious or ethnic membership, e.g. Lutherans. Sometimes, the restriction is based on membership in a certain investment plan, e.g. a retirement plan or college-savings plan. Those offered through a retirement plan such as an employee pension plan, 401(k) or 403(b) plan. These plans meet the necessary IRS requirements to allow participants to deduct the amount of their investments from their taxable income, thereby investing pretax dollars. Money builds up on a tax-deferred basis, and when the investor withdraws money, both the principal and profit are treated as taxable income.

The redemption fee is an amount charged when money is withdrawn from a fund. This fee does not go back into the pockets of the fund company but rather into the fund itself and does not represent a net cost to shareholders. Also, unlike contingent deferred sales charges, redemption fees typically operate only in short, specific time periods, commonly 30, 180, or 365 days. However, some redemption fees exist for up to five years. Charges are not imposed after the stated time has passed. These fees are typically imposed to discourage market-timers, whose quick movements into and out of funds can be disruptive. The charge is normally imposed on the ending share value, appreciated or depreciated from the original value.

These offerings invest only in stocks from a given state or region within the United States.

This figure is the percentage a company earns on its assets in a given year (Year 1, 2, etc.). The calculation is net income divided by average total assets. The resulting figure is then multiplied by 100. ROA shows how much profit a company generates on its asset base. The better the company, the more profit it generates as a percentage of its assets. The company's net income is found in the annual income statement. The company's total assets are found in the annual balance sheet. For example, a major software company was earning more than 20% on its assets-an incredible level of profitability. For every $1 of assets, the company was able to produce more than $0.20 of profits.

This figure represents the rate of revenue growth over the trailing one-year period for the stocks held by a fund. Revenue growth gives a good picture of the rate at which companies have been able to expand their businesses. All things being equal, stocks with higher revenue growth rates are generally more desirable than those with slower revenue growth rates. Morningstar aggregates revenue-growth figures for mutual funds using a median methodology, whereby domestic stocks are ordered from highest to lowest based on their revenue growth rates. The asset weighting of each holding is added together until the total is equal to or greater than half of the total weighting of all domestic stocks in the fund. The revenue growth rate for that holding is then used to represent the revenue growth rate of the total portfolio.

See Bear Market Rank, Beta, Fair Value Uncertainty, Morningstar Risk, Standard Deviation

Role in Portfolio assists with portfolio allocation, funds can be designated core, supporting player, or specialty. Core funds should be the bulk of an investor's portfolio, while supporting players contribute to a portfolio but are secondary to the core. Specialty offerings tend to be speculative and should typically only be a small portion of investors' portfolios.

Sectors help investors and investment professionals more easily compare and understand the sector exposures of mutual funds and portfolios. At Morningstar, the stock market is divided into twelve specific industry sectors. Sectors are based on what companies actually do. That is, unlike some other sector classification systems, sectors aren't based on expected behavior of the stocks of these companies.

The sectors are as follows:

Information
% Software
Companies engaged in the design and marketing of computer operating systems and applications. Examples include Microsoft, Oracle, and Siebel Systems.

% Hardware
Manufacturers of computer equipment, communication equipment, semiconductors, and components. Examples include IBM, Cisco Systems, and Intel.

% Media
Companies that own and operate broadcast networks and those that create content or provide it to other media companies. Examples include AOL Time Warner, Walt Disney, and The Washington Post.

% Telecommunication
Companies that provide communication services using fixed-line networks or those that provide wireless access and services. Examples include SBC Communications, and Alltel.

Service
% Health Care Services
Includes biotechnology, pharmaceuticals, research services, HMOs, home health, hospitals, medical equipment and supplies, and assisted living companies. Examples include Abbott Laboratories, Merck, and Cardinal Health.

% Consumer Services
Includes retail stores, personal services, home builders, home supply, travel and entertainment companies, and educational providers. Examples include Wal-Mart, Home Depot, and Pulte Homes.

% Business Services
Includes advertising, printing, publishing, business support, consultants, employment, engineering and construction, security services, waste management, distributors, and transportation companies. Examples include Manpower, R. H. Donnelley, and Southwest Airlines.

% Financial Services
Includes banks, finance companies, money management firms, savings and loans, securities brokers, and insurance companies. Examples include Citigroup, Washington Mutual, and Fannie Mae.

Manufacturing
% Consumer Goods
Companies that manufacture or provide food, beverages, household and personal products, apparel, shoes, textiles, autos and auto parts, consumer electronics, luxury goods, packaging, and tobacco. Examples include PepsiCo, Ford Motor, and Kraft Foods.

% Industrial Materials
Includes aerospace and defense firms, and companies that provide or manufacture chemicals, machinery, building materials, and commodities. Examples include Boeing, DuPont, and Alcoa.

% Energy
Companies that produce or refine oil and gas, oil field service and equipment companies, and pipeline operators. Examples include ExxonMobil, Schlumberger, and BP Amoco.

% Utilities
Electric, gas, and water utilities. Examples include Duke Energy, Exelon, and El Paso.

This statistical measurement of dispersion about an average, depicts how widely a mutual fund's returns varied over a certain period of time. Investors use the standard deviation of historical performance to try to predict the range of returns that are most likely for a given fund. When a fund has a high standard deviation, the predicted range of performance is wide, implying greater volatility.

Standard deviation is most appropriate for measuring the risk a fund that is an investor's only holding. The figure cannot be combined for more than one fund because the standard deviation for a portfolio of multiple funds is a function of not only the individual standard deviations, but also of the degree of correlation among the funds' returns. If a fund's returns follow a normal distribution, then approximately 68% of the time they will fall within one standard deviation of the mean return for the fund, and 95% of the time within two standard deviations. For example, for a fund with a mean annual return of 10% and a standard deviation of 2%, you would expect the return to be between 8% and 12% about 68%of the time, and between 6% and 14% about 95% of the time.

At Morningstar, the standard deviation is computed using the trailing monthly total returns for the appropriate time period. All of the monthly standard deviations are then annualized. Standard deviation is also a component in the Sharpe Ratio, which assesses risk-adjusted performance.

For example, Fund A has a standard deviation of 23.56%. This means that approximately 68% of the time, Fund A will be within 23.56% of its mean of 25.33.

A proprietary Morningstar data point, Stock Type offers an easy way to narrow down the stock universe to certain types of companies. Stock Types also help you quickly determine the diversification level of portfolios. For instance, you might discover that most of your holdings are categorized as Speculative Growth. If you want to lessen your portfolio's risk, you could invest in other types of stocks.

Morningstar places stocks into eight type designations: Distressed, Hard Asset, Cylical, Speculative Growth, Aggressive Growth, Classic Growth, Slow Growth and High Yield-Each designation defines a broad category of investment characteristics. Stocks are assigned to a type based on objective financial criteria and Morningstar's proprietary algorithm, so stocks of the same type have similar economic fundamentals. Every stock has individual idiosyncrasies, but in general, when evaluating investments, many of the same concerns and evaluation methods will apply across the stocks in one type.

Calculated in-house using Morningstar's proprietary algorithm. You may notice that some stocks in our database do not have Stock Types. This is only because they do not meet the criteria needed to fit into any of the Stock Type categories. A listing of N/A (Not Applicable) under Stock Type is no reflection on the performance or underlying value of the stock itself.

Distressed
These companies are having serious operating problems. This could mean declining cash flow, negative earnings, high debt, or some combination of these. Such "turnaround" stocks tend to be highly risky but also harbor some intriguing investments.

Hard Asset
These companies main businesses revolve around the ownership or exploitation of hard assets like real estate, metals, timber, etc. Such companies typically sport a low correlation with the overall stock market and investors have traditionally looked to them for inflation hedges.

Cyclical
Cyclical companies core businesses can be expected to fluctuate in line with the overall economy. In a booming economy such companies will look excellent; in a recession, their growth stalls, and they might even lose money.

Speculative Growth
Don't expect consistency from speculative growth-companies. At best their profits are spotty. At worst they lose money. In fact, many companies never make it beyond speculative growth, going instead to bankruptcy court. That's why they're speculative. But current profitability isn't what makes speculative-growth companies interesting. It's future profits. Hopefully, a speculative-growth company will eventually blossom into a world-class company.

Aggressive Growth
Aggressive-growth companies show a bit more maturity than their speculative-growth counterparts: They post rapid growth in profits, not just in sales-a sign of more staying power. At this point, it's time to make some money.

Classic Growth
These firms are in their prime and have little left to prove. The best classic growers have blossomed into money machines, churning out steady growth, high returns on capital, positive free cash flows, and rising dividends. The catch is, their growth is nowhere near that of the aggressive-growth group.

Slow Growth and High Yield
The growth of these companies is a fading memory. Having run out of attractive investment opportunities, most of them pay out the bulk of their earnings in dividends-expect high payout ratios-rather than plow the profits back into their businesses.

While there may be an aging process for companies, there's not one for stocks. Investors like Warren Buffet have focused on finding great stocks in and around the classic-growth category. Peter Lynch was more eclectic, investing in everything from speculative growth to slow growth. Most of us would want a smattering of companies from across the spectrum. By putting each company in context and paying special attention to how it measures up against others in its age bracket, you can do just that.