One simple way to gauge performance is to compare your fund's total return against the performance of an index, which represents and tracks the behavior of a market segment. Mutual fund companies generally use indices as benchmarks to measure the portfolio manager's effectiveness in meeting a fund's financial objectives. You can also evaluate your mutual fund by comparing its performance to its peers, which are funds that share a similar investment objective with your fund.
|
Below are a few examples of indices and averages that mutual fund companies may use as benchmarks:
-
The
Dow Jones Industrial Average is an often-quoted market indicator that comprises 30 widely held blue-chip stocks.
-
The
S&P 500 Index (S&P 500) is based on the average performance of 500 companies that have the largest
market value
within their industry, and is considered a better indicator of overall stock market performance than the Dow.
-
The
90-Day Treasury Bill is a good way to track interest rates. Treasury Bill rates, reported weekly, respond immediately to interest rate changes made by the U.S. Federal Reserve Board.
-
The
Russell 2000® Index tracks the performance of stocks from 2,000 small U.S. companies.
-
The
MSCI EAFE Index tracks the performance of companies in developed market countries in Europe, Australasia, and the Far East.
-
Nasdaq exchange is the first electronic stock market in which buyers and sellers can exchange shares over a computer network. Many small start-up and high-tech companies are listed on this exchange.
-
Lipper is a global leader in supplying mutual fund analytical information. Lipper gathers the performance of all mutual funds that are managed similarly, and places them into a category. Results of Lipper's comparison, in the form of an index of similar funds, are included in each Delaware Investments mutual fund annual report.
|
|
Using benchmarks
With your fund's prospectus or annual report in hand, take a look at your fund's long-term performance. Does it consistently perform well compared to its benchmark and peers? Remember that short-term results are not necessarily an indication of how your mutual fund will perform in the long term.
After making comparisons, you may find that your fund isn't performing as well as you'd like, or it may no longer match your investor profile, which includes your financial goals, risk tolerance, and time horizon. For a better understanding of whether you should continue to stay invested in your fund, consider each of these questions.
-
Has the mutual fund underperformed its peers over three years?
-
Has the mutual fund changed its strategy or focus to one you do not like or understand?
-
Is the risk that you're taking not worth the rate of return you are receiving?
-
Is the mutual fund just far too
volatile
for your risk tolerance?
If you answered yes to any of these questions, you may want to review Delaware Investments' Ask before selling page for more in-depth information.
This information is intended to provide general investment education and is not intended to provide investment advice. For more specific information on how to allocate your investment savings plan, please contact your financial advisor or Delaware Investments.
|
