Funds Intermediate: Benchmarks for Funds

Test your knowledge

Choose wisely. There is only one correct answer to each question.

0%
Keep studying!

Get a certificate for this quiz
Enter your name to generate a certificate that you can save or print immediately. Optionally, add your email address to have a copy of the certificate emailed to you.


Review your answers below to learn more.
1.
In regard to mutual fund benchmarks, what are peer groups?
Choose wisely. There is only one correct answer.
Funds that buy the same types of securities. You should compare funds to others in the same peer group.
2.
Which is the best index to use when analyzing a U.S. large-company fund's performance?
Choose wisely. There is only one correct answer.
The SP 500 Index. The DJIA is too narrow a benchmark for most large-company funds, and the MSCI EAFE index follows international stocks.
3.
Why is the Dow Jones Industrial Average rarely used as a performance benchmark for stock mutual funds?
Choose wisely. There is only one correct answer.
Its range is very small. With only 30 stocks, it's hardly indicative of the whole stock market.
4.
Imagine that you have calculated that you need a mutual fund that returns 7% per year for the next 35 years to fund your retirement. What would be a reason NOT to instead choose a fund that returned 8, 9, or even 10% so that you could save extra?
Choose wisely. There is only one correct answer.
There would be a greater risk of loss. The return is greater because the risk is greater. You would be risking your ability to retire in 35 years if you chose the fund with the higher annual return.
5.
Once you've calculated your personal benchmark for investing, choose a fund that _______.
Choose wisely. There is only one correct answer.
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.