Funds Intermediate: Benchmarks for Funds

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1.
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 _______.
Choose wisely. There is only one correct answer.
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.
2.
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.
3.
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.
4.
In the world of mutual funds, peer groups are funds that buy the same types of securities that your fund buys.
Choose wisely. There is only one correct answer.
True. Their value is that they give you a way to examine your fund's performance.
5.
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.