FI Score, or Financial Independence Score, is a score from 0 to 100 of how good a mutual fund or ETF is for financial independence for an investor just getting started. Every fund in the Minafi Fund Directory has an FI Score.
FI Score is currently in development. As I’m able to grab more information about funds from public APIs, the formula will evolve.
FI Score Formula
The FI Scoring formula is a work in progress. It doesn’t attempt to say which funds are “good” or “bad”, but more which funds are “good” for people pursuing financial independence and focusing on a simple portfolio. It’s an opinionated measure that focuses on low-fee, diversified index funds.
The current FI Score Formula is based on the following.
Benchmark Score: 20% of the FI score. This is based on how closely the sector asset allocation matches the benchmark asset allocation. If the fund fully matches the benchmark, it’ll get all 20%. If the sum of all sector differences is 50% of the funds total assets, the fund will get a 0%.
Expense Ratio Compared to the Category: 20% of the FI Score. This groups together all funds in the same market & category and sorts them by expense ratio. The fund with the lowest expense ratio gets all 20%. The fund with highest expense ratio gets 0%. All others in between get a score proportionate to their expense ratio ranking compared to similar funds.
Net Expense Ratio: 20% of the FI score is based on the raw expense ratio. An expense ratio of 1% or higher gets 0%. An expense ratio of 0% would get all 20%, while an expense ratio of 0.5% would receive 10% out of the possible 20%.
Market & Category: 40% of the FI Score. If a fund is one of 3 funds you’d need for diversification (US, Bonds, Intl), it’ll earn all 25%. If it’s one of about 5 funds you’d hold it’ll earn 20%. If it’s one of 10 funds it’ll earn 12%.
Future Scoring Criteria
Load, performance, index funds vs active funds, turnover, dividends and more are still in the works.
This is still very much a work in progress, but I’m excited to see where it goes! I plan to open source the code and formula for it so anyone can use the same formula.
I’m also looking for feedback! If you have thoughts on what should be a part of this formula, please reach out so we can chat.