Course 201: Five Questions to Ask Before Buying a Mutual Fund
How Has It Performed?
In this course
1 Introduction
2 How Has It Performed?
3 How Risky Has It Been?
4 What Does It Own?
5 Who Runs It?
6 What Does It Cost?

Many would say that a fund that produced returns of 22% per year for the past five years has a better manager than a fund that returned 20% per year over the same period. That's sometimes the case but not always. The fund that gained 20% may have beaten competing funds that follow the same investment style by six percentage points, while the 22% gainer may have lagged its competitors by a mile.

To really know how well a fund is doing, put a fund's returns into context. Compare the fund's returns to appropriate benchmarks—to indexes and to other funds that invest in the same types of securities.

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