Mutual Funds: Benchmarks

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Mutual Funds, Stocks, Ratings agency, economy, Markets

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420x316-grad-lee Dee Lee
Dee Lee is a Certified Financial Planner who received a diploma in...
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BOSTON (CBS) – On an annual basis you will want to see how your mutual funds are doing compared to their peers. You need to be able to compare your results with a standard in order to evaluate your portfolio.  A benchmark is a standard used for comparison.

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 U.S. Stocks.

So now you need to be able to find a list of the benchmarks somewhere. You can start with your mutual fund company. They often allow you to compare your results with a standard. When the market is up they are happy to show you how well you are doing investing in their mutual funds.

Our Boston 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 U.S. 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.

The paper edition of the WSJ is good, but I like their website better. Use their Market Data Center.

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 Lipper Fund Indexes through the previous market trading day with year-to-date percentage changes. 2011 was neither the worst nor the best year for mutual funds! The international sector took a beating. With 400 and 500 swings in a week many investors ran for cover!

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 checkup. 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.

In doing some research I came across a new newsletter and website the Mutual Fund Observer for research on your funds. Interesting site and worth the time to read about the funds listed.

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
•    Morgan Stanley Emerging Markets for developing country companies
•    Lehman Bros. Long Term Bond Index for bonds with 20 years to maturity
•    Lehman Bros. Intermediate Govt/Corp Index for 5-10 year maturity bonds
•    Lehman Bros. Bond Buyer Municipal Index for long term municipal bonds

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