1. Design TWO mutual fund SCREENS and ONE ETF SCREEN using screening tools in the Morningstar database through the Library. These screens are for the purpose of greatly narrowing the set of funds you will examine in constructing a mutual fund portfolio. Once you have narrowed the field of funds using each screen, anywhere from 10 to maybe 50, you will be ready to examine the funds individually (NOT in this exercise but in the next one) and choose a small number for your hypothetical portfolio. Note: In this exercise you will NOT be designing your ultimate selection of funds but only a draft of the first step in that process the design of the screens. You are asked to design more than one screen because you will probably want to invest in mutual funds that themselves focus on different parts of the market in order to diversify your portfolio of mutual funds. Also, since designing any screen will unintentionally exclude some good funds, you may wish to design screens that seek to pick up good funds missed by other screens (something well discuss in class).

2. Explain your reasons for the screens you have designed, ones that explain your general goals in constructing a portfolio and why each discretionary element of the screen makes sense as a way to narrow the field of funds that you will research more intensely. (NOTE: In class we will distinguish between mandatory and discretionary elements.)

MANDATORY ELEMENTS OF EACH MUTUAL FUND SCREEN YOU RUN:

1. Fund Category = (you choose) eg. US Equity, Small Value, International, etc.
2. Distinct Portfolio Only = Yes
3. Closed to New Investment = No
4. Minimum Initial Purchase <= (you choose a number, such as <= 8000)
5. Minimum Initial Purchase >= 1 (Ill explain this in class.)

NOTE: You will not want to design a screen that produces too few results (generally no fewer than about 5). Note also that while in this exercise you have to design only two screens, ultimately you will want to produce many more screens in choosing the funds for your portfolio (in the next exercise). I also suggest that you make use of the VIEW feature in the mutual fund screener.

In submitting this exercise, everything should be in a single Word document. That is, in this document you (for each of your three screens) you will provide an explanation for why you have chosen each of the discretionary screening elements in the screen.

The discretionary elements for your screen might come from a measure on one or more of the following:

• A specific category of the stock market, such as International, US Small Value, Emerging Market, Technology sector, etc.
• Performance measures
• Risk measures
• Expense ratio
• Load
• Manager tenure

Generally, its wise not to use too many discretionary elements.