Money Matters – Mutual Funds: Benchmarks

BOSTON (CBS) – A benchmark is a standard used for comparison. And when investing you need to be able to compare your results with a standard in order to evaluate your portfolio. Most mutual funds are up this year so why bother. You still need to see how your fund did compared to its peers.

[Audio|titles=Benchmarks|artists=Dee Lee]

If you own an international fund you should be comparing it to other international mutual funds and not the S&P 500 index which is comprised of mostly US Stocks.

So now you need to be able to find a list of the benchmarks somewhere so you can compare. Our local newspapers have some information but my preference is the Wall Street Journal. Turn to the “Money & Investing” section. Check the Markets Lineup.

Here you can find the Dow Jones Industrial Average along with all of the other major US stock market indexes including the S&P 500, the Russell 2000, Wilshire 5000 and the NASDAQ. Also there you will find the international stock indexes.

I do like the paper edition of the WSJ with my cup of tea in the morning but I like their website better for finding the information I need instantly. Use their Market Data Center. Here everything is on one page and if it’s not listed the link is there.

Check out the home page and find a box entitled Mutual Funds. Look for the “Lipper Indexes”. Here you’ll find a list of 21 of the Lipper Fund Indexes through the previous market trading day with year-to-date percentage changes. And this year they are all in positive territory.

Some of the index categories you’ll find there are:

  • Large-Cap Growth
  • Large-Cap Value
  • Multi-Cap growth
  • Mid Cap growth
  • Mid-Cap Value
  • Small-Cap Growth
  • Small-Cap Value
  • International
  • Balanced
  • Equity Income

So now that you know where to find the data you can then compare your investments to the various indexes and see how you did. Just remember this is just a quick gauge of your investments’ performance, not a complete check up. It just tells you how you did for a period of time. If something looks out of line, make sure you are using the correct benchmark.

If your mutual fund is not within a couple of points of its index make a note to keep an eye on it over the next several quarters. Check out for research on your funds. They don’t tell you when to buy mutual funds but when to sell a mutual fund.

One more thing: Here are some of the common benchmarks. Again look to the Wall Street Journal to find the daily numbers

  • Dow Jones Industrial Averages
  • Standard & Poor’s 500 for large size US companies
  • Russell Mid-cap index for medium size US companies
  • Russell 2000 for small size US companies
  • Europe, Australia & Far East (EAFE) for international companies
  • Lehman Bros. Intermediate Gov’t/Corp Index for 5-10 year maturity bonds
  • Lehman Bros. Bond Buyer Municipal Index for long term municipal bonds

·         Morgan Stanley Emerging Markets for developing country companies

·         Lehman Bros. Long Term Bond Index for bonds with 20 years to maturity

More from Dee Lee
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