For the overall rating of bond funds, taxable funds and tax-exempt are treated separately. Category ratings are based on risk-adjusted returns of the funds in that category. Each U.S. diversified fund is classified by market capitalization of the stocks in the portfolio and by the nature of those stocks.
Hybrids mix stocks and bonds, and possibly other assets.
Sector and regional foreign funds are as indicated. Bond funds are categorized by issuers of the securities they buy and the maturity of those bonds. General bond funds invest in a variety taxable securities, usually investment grade. Government and municipal funds are also categorized by maturity, except the ultrashort category includes only corporate and government funds. The cost of buying a fund.