Choose wisely. There is only one correct answer to each question.
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1.
Once you've calculated your personal benchmark for investing, choose a fund that _______.
Usually returns about the same as the benchmark. It's tempting to pick a fund that returns more than you need, but remember: the greater the return, the greater the potential for loss. Be sure the fund you pick has a history of returning as much as your benchmark, or you may not meet your goal.
2.
Which is the best index with which to compare a small-company fund's performance?
The Russell 2000 Index. The SP 500 includes mostly large-company stocks, and the Bloomberg US Aggregate Bond Index follows bonds. Neither is an appropriate benchmark for small-company funds.
3.
Which is the best index to use when analyzing a U.S. large-company fund's performance?
The SP 500 Index. The DJIA is too narrow a benchmark for most large-company funds, and the MSCI EAFE index follows international stocks.
4.
Your personal benchmark in investing refers to _______.
The yearly return you will need to meet your goal. This figure is what you will aim to match every year you invest for your goal.
5.
In regard to mutual fund benchmarks, what are peer groups?
Funds that buy the same types of securities. You should compare funds to others in the same peer group.
