Funds Intermediate: Benchmarks for Funds

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1.
Your personal benchmark in investing refers to _______.
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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.
2.
Fund X underperformed the SP 500 by five percentage points per year during the past five years, after beating the index by just as much in the three previous years. Fund X _______.
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Probably owns something other than large-company stocks. In this case, the SP 500 is probably a bad benchmark for this fund. It likely owns something other than large-company stocks. To put its performance into better context, check its record relative to its Morningstar category peers.
3.
In the world of mutual funds, peer groups are funds that buy the same types of securities that your fund buys.
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True. Their value is that they give you a way to examine your fund's performance.
4.
Which is the best index to use when analyzing a U.S. large-company fund's performance?
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The SP 500 Index. The DJIA is too narrow a benchmark for most large-company funds, and the MSCI EAFE index follows international stocks.
5.
Why is the Dow Jones Industrial Average rarely used as a performance benchmark for stock mutual funds?
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Its range is very small. With only 30 stocks, it's hardly indicative of the whole stock market.