Funds Intermediate: Benchmarks for Funds

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1.
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.
2.
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.
3.
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.
4.
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.
5.
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.