Most mutual fund companies offer a number
of funds pursuing different investment strategies and objectives
that are known collectively as a
fund
family.
Some very large companies may have families of
100 or more funds. Investing in a variety of funds within a single
fund family, rather than spreading your assets across different
fund companies gives you flexibility in managing your fund
portfolio
and reduces the costs and paperwork of buying and selling funds,
or shifting your assets from one fund to another. For instance,
if your investment objectives change or your favorite fund manager
leaves a certain fund, you may be able to shift your assets to
another fund within the same family without paying exchange fees
for moving your money — though you may owe
capital gains
taxes on any increase in value of the fund you're
leaving.
All in the family
While investing in a fund family makes it
easy and cost-effective to
diversify
your mutual fund portfolio and move your assets, families can
have their drawbacks. For instance, even if the fund family offers
a wide variety of funds, they may all share a similar investment
philosophy or style that may not be best suited to your financial
objectives. And by focusing on only one fund family's offerings,
you may miss stronger funds available from other companies.
Similiarly, if there are problems with a fund company and all your assets are in that company's funds, you may feel the impact more than if you owned funds through several families.
