How to Judge Mutual Fund Performance (2024)

FAQs

How to Judge Mutual Fund Performance? ›

Look at the fund's historical returns over different time periods (e.g., 3 years, 5 years, and 10 years). Compare these returns to its benchmark index to see how the fund has performed relative to the market. Evaluate the fund's consistency of returns.

You should compare the performance of the mutual fund with its benchmark and peer group, and consider the consistency and stability of the returns. You should choose a mutual fund that has delivered superior and consistent returns over the long term, and has outperformed its benchmark and category average.

Since you hold investments for different periods of time, the best way to compare their performance is by looking at their annualized percent return. In this example, your annualized return is 9.42 percent. Tip: Use FINRA's Fund Analyzer to find annual and total return for mutual funds and ETFs.

Net Asset Value

Net Asset Value (NAV) refers to the market value per unit of mutual funds and is often a key factor for many investors. Mutual funds with high NAV are expensive and can also offer lesser growth whereas the ones with lower NAV cost less and give more growth opportunities.

One of the primary factors to consider when evaluating a fund's performance is its historical returns. Look at the fund's past performance over different time frames, such as 1-year, 3-year, 5-year, and since inception. This provides a glimpse into how the fund has performed in various market conditions.

Mutual funds with relatively low expense ratios are generally always desirable, and low expenses do not mean low performance. In fact, it is very often the case that the best-performing funds in a given category are among those that offer expense ratios below the category average.

To evaluate the performance of a fund manager for a five-year period using annual intervals would also require examining the fund's annual returns minus the risk-free return for each year and relating it to the annual return on the market portfolio minus the same risk-free rate.

The average mutual fund return for growth and income funds for the last 10 years is approximately 10.24%. Roughly 75% of mutual funds underperform their benchmark index over a 10-year period. As of 2019, mutual funds managed more than $22.5 trillion in assets.

Which question should you ask a financial advisor? ›

Ask your advisor about the criteria they use to define success, how they report and communicate your progress and when to further diversify or rebalance your portfolio.

If you're flying solo, the statement highlights' Direct'. Verify your account number, bank name and IFSC code to avoid complications during the mutual fund redemption process. This section is the talking point of your investment summary, marking details to evaluate previous decisions and accordingly take future calls.

In most cases, investors choose a market index, or combination of indexes, to serve as the portfolio benchmark. An index tracks the performance of a broad asset class, such as all listed stocks, or a narrower slice of the market, such as technology company stocks.

Benchmark is an index that is used to Measure a Mutual Fund's overall performance. It provides an indicative value of how much one's investment should have earned, which can be compared against how much it has earned in reality.