Equity Frameworks
Structured thinking for equity fund selection
Nine frameworks covering indexing, style, vehicle mechanics, diversification, cost, and the research methodology behind them.
9
Frameworks
1
Methodology
Updated Quarterly
Review Cadence
Framework 01
Large-Cap Indexing
Market-cap weighted indexing allocates more capital to already-larger companies by construction. This concentrates exposure in a small number of dominant names during periods of narrow leadership, even though the fund is nominally diversified across hundreds of holdings.
- 01Weighting is proportional to free-float market capitalization.
- 02Turnover is low, which keeps costs and tax drag minimal.
- 03Top-10 concentration should be checked before assuming diversification.
Framework 02
Growth vs. Value
Style is a durable, structural lens for classifying equity funds — independent of sector or market-cap segment.
Growth
Priced for future earnings
Growth managers accept higher current valuations in exchange for expected future earnings expansion, typically in technology, healthcare innovation, and consumer discretionary segments.
Value
Priced below fundamentals
Value managers screen for low price-to-book, low price-to-earnings, or high free cash flow yield relative to sector peers, often concentrated in financials, energy, and industrials.
Framework 03
Mutual Funds
Priced once daily at NAV, purchased directly from the fund company or through a brokerage. Often used inside employer retirement plans where share-class structure determines the effective expense ratio.
Pricing
Once daily
Access
Fund company / plan
Framework 04
ETFs
Traded like a stock on an exchange throughout the day, typically with lower minimums and a creation/redemption mechanism that supports tax efficiency for buy-and-hold investors.
Pricing
Continuous
Access
Any brokerage
Framework 05
Diversification
Diversification reduces uncompensated, company-specific risk without requiring the investor to correctly predict which company will outperform. It does not eliminate market-wide (systematic) risk, and holding many funds that track the same index does not add diversification benefit.
Framework 06
Fund Selection Framework
A five-point checklist applied consistently before any fund is added to a portfolio.
Cost
Expense ratio vs. category median
Tracking
Deviation from stated benchmark
Tenure
Manager and strategy continuity
Turnover
Trading activity and tax impact
Fit
Role within overall allocation
Framework 07
Expense Ratio Comparison
Comparing expense ratios only makes sense within the same category. A 0.60% active small-cap fund and a 0.03% large-cap index fund are not competing for the same role in a portfolio.
Model the impact in the simulator →Framework 08
Risk/Return Framework
Metric
Standard Deviation
Dispersion of returns around the average
Metric
Maximum Drawdown
Largest peak-to-trough decline
Metric
Sharpe Ratio
Excess return per unit of volatility
Framework 09
Research Methodology
Every framework on this site is built from prospectus-level fund data, SEC filings, and publicly disclosed expense figures, then cross-checked against category averages before publication. See our full standards on the Institutional Standards page.
Review institutional standards →