Jemstep Review: Customized Mutual Fund and ETF Rankings

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Jemstep is a new website that lets you track your investment portfolio along with providing advice on improving your mutual fund and ETFs holdings. In terms of existing products, you could call it a combination of the all-in-one view of of plus the mutual fund ratings of However, the key difference from Morningstar is that their Jemscore ranking system is customized for your specific preferences. The weighting of different factors changes with your answers to the topics covered by their “goal preference” survey:

  • Demographics: Age, time to retirement, etc.
  • Risk tolerance: Common risk-questionnaire survey questions about return vs. volatility
  • Fees, Taxes, & Income: Sensitivity to fees, taxes and gains, preference for income vs. total return
  • Fund preferences: Active vs. passive, manager tenure, loads, etc.
  • ETF preferences: Liquidity (volume) preferences, bid/ask spread sensitivity

Investment Account Aggregation
I haven’t entered all of my brokerage accounts, but so far the aggregation service works fine and all my different holdings including individual Treasury bonds shows up fine. Jemstep uses CashEdge for account aggregation, which is well-known and the backbone of several big banks. Although anything with a ticker symbol is tracked, Jemstep only provides rankings for mutual funds and ETFs and not individual stocks or bonds. There isn’t much in the way of asset allocation breakdowns or volatility measurements. (Update: There is an asset allocation chart available in the Portfolio summary page, although it may not pick up all your holdings.) It does track the historical performance of your accounts, which you can compare to a few basic benchmarks like the S&P 500.

Mutual Fund Rankings
I certainly like the idea of a customized ranking system. However, if anything, I don’t know if it goes far enough. The main weakness I see in their ranking system is the same as for Morningstar. Despite my survey answers, overwhelmingly what matters most is recent past performance. The rankings change each month, so if you always want to hold the “best fund” you’lll be left chasing one hot fund after the next. The top-ranked fund will rarely ever be an index fund.

For example, let’s look at my holding of the Vanguard Emerging Market Index ETF, VWO. Instead, it recommends as #1 the iShares MCSI Malaysia ETF (EWM). Okay, the Malaysian market has been doing quite well recently, but would it really be wise to hold a single small country ETF with a 0.53% expense ratio as opposed to one that holds all the emerging economies from China to Southeast Asia to Latin America, all at 0.22% expense ratio? Likewise, Morningstar has EWM at a 5-star rating and VWO at only a 4-star rating. Screenshot (click to enlarge):

Another #1 fund ranked for me was the Yacktman Fund (YACKX). I actually kind of like this actively-managed fund as a “fun money” holding, as the manager takes concentrated bets and isn’t afraid to be different than the crowd (right now, its portfolio is 11% Pepsi and 11% News Corp). But again, right now the past performance of Yacktman looks really great. But some quick research shows that back in 2000, recent performance was awful, and the fund’s assets were only $69 million which means very few people owned it. The fund’s own board of directors tried to oust him (see 2001 Kiplinger’s article). Would Jemstep (or Morningstar) have been recommending it then?

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  1. Hi Jonathan/Michael,

    Many thanks for taking the time to write a considered review about Jemstep. We are excited to be able to offer our service to the public and invite them to give Jemstep a try. In support of investors using Jemstep to make better investment decisions with confidence, we’d like to clarify a few points raised in your article.

    VWO vs EWM
    We take your point here and agree with you. In the release you reviewed, Jemstep ranked funds against their peers in a broad category, and therefore Vanguard Emerging Market Index ETF was pitched against iShares MCSI Malaysia ETF based on the broad category of emerging markets. We recognize the limitations of this approach, helped by great user feedback, and our most recent release (available online now) ranks ‘apples to apples’, i.e., broadly diversified international or emerging markets funds will only be compared to similarly diversified funds. Similarly for region specific and country specific funds. Users also have the ability to select at what level they would like to search.

    For an extended period, this fund has delivered superior risk adjusted returns and its performance does often send it to the top for many user profiles. Part of Jemstep’s value is to help expose funds that meet users goals and preferences and for those who are looking for a quality active fund, Yacktman is a strong fund. Users who are looking for passive index funds can filter out active funds if they wish, and will receive recommendations for top ranked index funds that meet their needs. Similarly, for users who seek active funds, they will also soon be able to filter out the more aggressive funds.

    Past performance
    While past performance is taken into account, its only one of many metrics used in our evaluation. Jemstep uses 70 or so data points in four or five broad fund categories to evaluate funds, including tax, fees, risk, income, manager tenure and more. The importance or “weight” given to each data point in our evaluation depends on the user’s goals and preferences. User’s can in fact see how we break this up by clicking “how is this calculated” on their rankings page, and can modify this by changing their preferences. In this regard, we encourage users to fill out their profile and preferences with as much detail as possible to allow for more personalized recommendations.

    In addition, we provide multiple opportunities for users to drill down further into the underlying data and make comparisons, providing validation – should they need it – of why the recommendations stack up the way they do. It will be apparent that risk adjusted return is but one element in our process.

    While analysis has shown that past performance is an imperfect predictor of future performance, the one strong correlation is that the bottom quartile of funds tend to consistently underperform and in many cases are shut down by their firms. When users import their holdings, Jemstep reviews all the holdings against the investor’s goals and provides specific advice on which low performing funds to consider selling and which funds to replace them with.

    Asset Allocation
    Jemstep is a firm believer in the importance of asset allocation and investors should consider the fund recommendations in light of their current and target asset allocation (if any) they have set for themselves. Jemstep provides a snapshot of their existing allocation so they can assess where they stand (this is located on the Portfolio page under fund summary, asset class). We are developing an asset allocation module that will help users define a target allocation based on their goals, at which time our fund recommendations will be given in the context of the user’s target allocation.

    Improving our site is an ongoing process made all the easier by the considered feedback from reviews such as this one and our users. We invite users to try the service themselves and encourage further feedback and debate on how to improve the service for all. We remain committed to our mission of providing individual investors with high quality, actionable and transparent investment advice and this type of discussion only serves to help us as we continue to enhance the service.

    Many thanks again.
    Kevin Cimring
    COO, Jemstep

  2. I tried out Jemstep but the site appears to be very buggy and I was not able to add my accounts without getting a few error messages. The concept is interesting but the product has some refinement needed first.

  3. Hi Brian, thanks for trying Jemstep out. We are constantly refining and have recently released our latest version, which may address some of these issues. If you have any problems or other feedback it would help us if you could send your comments to All feedback is much appreciated.

    Thanks again.

  4. @Kevin Cimring – Thanks for stopping by! I do see the asset allocation pie chart now. A quick note that my entire 401k is put under the category of “other”, most likely due to the lack of ticker symbols from the import. I look forward to seeing future improvements.

    @Brian – I had the same experience with adding Vanguard, it gave me an error the first couple of times but on the third try it did sync properly.

  5. Thanks to your tip, I found my Jemscore weightings and risk was 47% and return was only 17%. So, the next question is, how is risk defined?

    I am thinking that Jemscore definition of risk is mostly the past volatility in the fund price, which to me is again closely linked to past performance. Does the “risk” factor in Jemscore have anything to do other factors, like with the concentration of the portfolio in the Top 10 holdings? Or total number of stocks held? Because in that way, I would say the Yacktman fund is riskier than other mutual funds.

  6. Hi Jemstep Team,
    I have just used the application and imported my accounts. The import worked well and I now have a single view of all my holdings.
    I really enjoyed the tool tips and fount them helpful, as far as “how is this calculated”, this is fantastic as it helped me to better understand the weightings and prompted me to complete all categories.
    Ill certainly will be using and watching this app and look forward to your future releases. Good luck and well done.
    I’ll be posting some comments on your support site.
    Thanks MW

  7. @jonathan in reply to “how is risk defined”:

    While volatility (standard deviation) is one of the factors that we include in risk it is not the only risk attribute we use in the rankings. In addition to volatility we also look at a fund’s value at risk, worst and best 3 month performance, its performance in different market cycles (bull and bear markets) and the fund’s risk-adjusted returns. Value at risk addresses many of the problematic issues related to using standard deviation as a risk measure, and by analyzing a fund’s performance during different market cycles we get a much better idea of the fund’s underlying characteristics i.e. is it a defensive fund that performs better in bear markets? These additional risk attributes have a major impact on our rankings. For example by only looking at volatility you would say that historically the Yacktman fund (YACKX) is more risky that the an S&P 500 index fund such as the Vanguard S&P 500 fund (VFINX). However when we analyze our additional risk attributes we see that YACKX in fact performed better during the past bear market than the S&P 500 index fund (-46.43% vs -55.16%), also it has a lower value at risk over 1, 3, 5 and 10 years, for example its value at risk over 5 years is significantly lower at -24.8% vs. -31.1%.

    In the very near future we will also be adding additional risk attributes to address concentration risk.


  8. It will be amazing to watch how ‘we’ make investment decisions 5 years from now. We use technology to execute today, but technology (math/science) should be used to analyze each individuals risk, incorporate each individuals beliefs about the future, single out investments or investment families to use, etc. Exciting times. Here’s to technology empowering the individual investor!

  9. Nice find. I was looking for something that would aggregate my accounts and just as importantly help me easily keep my portfolio at a target allocation.

    One question I have is about how safe it is. I currently utilize yodlee and am big fan, but though it does aggregate my accounts, it does not seem to do much in helping me manage my portfolio, such as determining my current portfollio allocation or helping me achieve an maintain a particular allocation ratio. Before using yodlee, I read up on their security setup and was impressed by how rigorous/tough it was. Does anyone know how jemstep goes about protecting client accounts?

  10. Hi Rick, thanks for your interest in Jemstep. I’d like to point you to 2 areas on our site that deal comprehensively with security and privacy. I hope these give you a sense of our extensive security measures:

    Many thanks.
    Kind regards,

  11. Sorry guys. I don’t give out my username and password to anyone! for any reason!

  12. Tony Padilla says

    Jemstep requests the financial accounts passwords and the like to be able to manage the allocation of assets. What type of security is there to assure me that the accounts are secured after our passwords are entered into the JEMSTEP forms? Is there a bond? Insurance?

  13. Tony Padilla says

    I did read the security information on the two following websites:
    The information provided is basically that JEMSTEP has CashEdge provide the security. What would be sufficient. should be provided, and should not be a problem to obtain and publish would be a qualified statement from CashEdge stating that CashEdge is the only one with access to our passwords and accounts and that there is no way that an employee of JEMSTEP, or anyone else for that matter, can ever have access our accounts or passwords information.
    I hope this can be provided because the idea behing JEMSTEP is of great benefit as it is, and has a great strategic value for us as clients and JEMSTEP as a financial services provider.

  14. How does jemstep make money? Will I be bombarded with ads

  15. Dg – the current version of the site is free and you won’t be bombarded with ads. We are adding some additional services in the future – like guidance on the most suitable asset allocation and automatic rebalancing – for which we will charge a subscription fee. But those services are optional and you will be able make use of our base services free of charge.

    Thanks for your interest.

    Kind regards,

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