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Mutual Fund Performance Evaluation Benchmarks

When evaluating the performance of your mutual fund, you should determine clear standards against which to compare it. Since every mutual fund has a specific approach and objectives, you should outline clear criteria for assessment of your mutual fund manager's performance. For example, if John's investment portfolio is divided evenly among holdings of stocks and bonds, a 12% return will be extremely unsatisfactory even if the overall market's returns were 16%. This is so since you have faced a risk that was not justified by the received returns.

We recommend evaluating the performance of your mutual fund to the following:

  • The S&P 500
  • The S&P 400 Midcap
  • The Wilshire 500
  • Dow Jones Industrial Average
  • The Russell 2000
  • The Solomon Brothers World Bond Index
  • The MSCI-EAFE
  • The NASDAQ Composite

In order not to risk choosing the inappropriate benchmark, go to Morningstar.com. In return to a $14.95 monthly fee, you will benefit the service of acquiring the right benchmark for your mutual fund's performance.

An additional service that you will enjoy in return to the subscription fee is the ability to browse through the various reports of mutual funds and the corresponding assessments. You can also obtain information regarding the expert opinion of analysts who have observed the performance of the mutual fund management teams. This subscription fee can be justified in your expenses and thus be deducted from your taxes when the time comes.

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