MUTUAL FUND FOCUS
Key performance indicators can help you determine a fund’s past performance.
Learn what benchmarks exist to help you compare different funds.
Once you’ve decided that mutual funds are right for your investing needs, how do you make sure you’re choosing the right one for you? Looking at how a fund has performed is one of many important considerations when selecting investments.
The mutual fund industry adheres to strict standards when publishing or providing mutual fund portfolio performance data. The intent is to provide fair and balanced information when potential investors compare various options.
Because of these standards, the amount of information available is comprehensive, and may also be very confusing when trying to understand the numbers presented. But if you know what to look for, you can quickly size up different funds and find one that’s right for you. Keep in mind that past performance is not indicative of future results, but seeing how a fund has performed over time may help provide some insight into how it historically has been managed.
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Before diving into fund performance, you should first have a clear sense of your financial goals and risk tolerance. Once you know what you’re saving for, when you’ll need the money and how comfortable you are with different levels of fluctuation in your account values, you can more easily narrow your choices. Most funds will provide a statement of investment objective and the relative risk of the fund when compared to other funds. These two pieces of information may provide you with enough information to know if a fund is in line with your needs. Once you find a fund that seems to match your goals and risk tolerance, the next step is to take a deeper look at the fund performance.
Here are some of the typical values used to determine fund performance:
Net asset value (NAV)
The NAV is the fund’s value or price per share. The NAV is calculated by dividing the total value of all the fund’s assets (minus its liabilities) by the number of shares issued. NAVs are only calculated once per day, after the market has closed.
Daily NAV change
Since mutual funds are only priced once a day, the daily NAV change is the difference between the fund’s most recent price per share and its price from the prior day. The daily NAV change can be shown as a dollars-and-cents change or a percentage change.
Returns
Mutual fund performance is usually presented as a total return. Total returns include both the fund’s change in value and the reinvestment of any dividends, capital gains or interest payments.
Average annualized or trailing returns
Average annualized returns, also known as trailing returns, illustrate fund performance over a specific time period, usually looking backward from a recent month or quarter-end. The most common time periods include three months, year-to-date, 1 year, 3 year, 5 year, 10 year and since inception.
Calendar year returns
Mutual funds will also often show calendar year returns which illustrate how a fund performed from January 1 to December 31 of that particular year. This allows you to see how the fund performed during specific historical time periods.
Growth of a $10,000 investment
Below is an example of a chart many mutual funds present to demonstrate how a $10,000 investment in that fund would’ve changed over time. These charts typically go back either 10 years or back to the initial launch of the fund.
Hypothetical example is for illustrative purposes only.
Listings of fund performance will usually include the fund’s benchmarks to provide a reference point for measurements. There are two common types of benchmarks:
Index benchmark
A benchmark like the S&P 500® Index or the Russell 2000 Index illustrates how a fund performed against large segments of the market. Index benchmarks are most meaningful when the fund invests in the same types of securities as the index does. There are stock and bond indexes, and it’s important to pay attention to the asset allocation of the fund before comparing it with a specific index.
Peer group benchmark
A benchmark based on similarly-structured funds enables a more apples-to-apples comparison of fund performance. A peer group benchmark may show the returns of the median fund in the peer group for several particular time periods. Sometimes the fund will show its percentile ranking within the peer group, which tells you how many of its peers it outperformed. A search on the internet may lead you to several options of firms that provide peer benchmark data, or the mutual fund company itself may provide that in its fund data fact sheets.
One important aspect of our active management approach is the care and thought that go into selecting indexes and peer groups to serve as benchmarks when comparing fund performance. We believe in delivering the most complete overview for each and every fund by selecting indexes that are similar in style with our funds (like large capitalization indexes to compare with a fund made up of primarily large capitalization securities) or peer groups focused on funds with similar investment objectives to our funds. When you choose to invest with Thrivent Asset Management, you’ll benefit from the expertise of our investment professionals and the convenience and choices we provide to make investing easier.
Any indexes shown are unmanaged and do not reflect the typical costs of investing. Investors cannot invest directly in an index.
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