Investing Advice

Comparing your fund to the competition

I want to stress the importance of using the right yardstick. Remember how you chose the fund based on its type of investments? You may have bought a sector fund because you believed that a particular industry will be hot over the next few years, or you bought a large-cap fund because you feel comfortable with big companies. This is fine, because we all must make our own decisions about our investments, and each of us has a different tolerance for risk.

Because of your fund's objectives and unique investment style, it may be doing better or worse than this year's average mutual fund. But to see how your fund is really doing, compare your fund's performance to others of exactly the same type or to the appropriate market index, and use EXACTLY the same time period. Otherwise, the comparison is meaningless.

Okay, you've had a couple of bad years. Do you dump your fund? Every, and I mean every fund, has a losing year from time to time. In fact, the best funds have had 2 out of 5 years where they don't even keep up with the S&P index average.

You have to expect some bad years. In the 30 years from 1971 to 2001, both the NASDAQ and the NYSE had 8 losing years, so how can you expect your mutual fund to make money in a year when most stocks are losing value?

Other Stock Market Basics Topics:

  1. Mutual Fund Advantages
  2. History of Mutual Funds
  3. NAV
  4. Dollar Cost Averaging
  5. General advice about choosing a fund
  6. Mutual Fund Ratings
  7. Evaluating Mutual Fund Investment Risk
  8. Mutual Fund Share Classes
  9. Mutual Fund Fees
  10. The Mutual Fund Prospectus
  11. How important is the manager's length of experience?
  12. Why is the prospectus hard to understand?
  13. Mutual Fund Annual Report
  14. Comparing your fund to the competition
  15. Comparing funds on an after-tax basis
  16. Average Return on Investment
  17. How Not to Pick a Mutual Fund
  18. Cashing in Your Fund
  19. When to Sell Your Fund
  20. Mutual Funds and Asset Allocation
  21. When to get started with a mutual fund
  22. Types of Mutual Funds
  23. Value Stock Funds
  24. Growth Stock Funds
  25. Small and Micro-cap Stocks
  26. Mid Cap
  27. Large Cap Companies
  28. Income Stock Funds
  29. Mutual Fund Index
  30. Enhanced Index Funds
  31. Sector Mutual Funds
  32. Stock Market Sectors
  33. Defensive Stocks
  34. International Funds
  35. Real Estate Mutual Funds
  36. Socially Responsible Funds
  37. Balanced Funds
  38. Tax-Efficient Funds
  39. Bond Convertible Funds
  40. Junk Bond Funds
  41. Mixtures of stock types
  42. Closed End Funds
  43. Exchange Traded Funds (ETF’s)
  44. Stock Picking Strategy - Picking your own stocks?
  45. Fund names, and what they really invest in
  46. How to get started
  47. Where can I start investing with no money?

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