Funds Intermediate: Benchmarks for Funds

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1.
Which is the best index with which to compare a small-company fund's performance?
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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.
2.
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.
3.
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.
4.
Once you've calculated your personal benchmark for investing, choose a fund that _______.
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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.
5.
In regard to mutual fund benchmarks, what are peer groups?
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Funds that buy the same types of securities. You should compare funds to others in the same peer group.