Mutual Funds
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How is mutual fund performance judged?
Depending on the objectives of the fund, performance can be judged based on:
- Total Return — how much combined increase in value (capital appreciation)
and income the fund delivers to shareholders
- Income — what the yield is for a bond fund, or for a stock fund that seeks
dividends
- Risk Adjusted Returns — a ratio that characterizes how much risk was
needed in order to earn a certain return; the higher the return compared to the risk, the better
- Performance — compared to other mutual funds in the same class —
determining if the fund performs better than, as well as, or worse than its peers
- Performance — versus the index — for example, how a fund that invests in
the largest blue-chip companies performs compared to the Dow Jones Industrial Average, which tracks the
performance of those companies