How to Compare the Average Total Returns for Mutual Funds

The best way to judge your mutual fund is by looking at its performance over a few years. A fund's performance is determined by its total return. Finding the total return of a fund involves adding the capital appreciation, dividends and capital gain distributions and subtracting the expenses.

Types of Funds

Mutual funds can be classified as value and growth or balanced funds. Once you determine the type of mutual fund that you have, you can analyze it as compared to its competitors.

Past Fund Performance

Mutual funds list their returns over 1 year, 5 years and 10 years. This will help you determine how the fund has performed and what kind of return you may be able to expect over the next few years.

Measure Your Results

Use sites like Morningstar or Yahoo Finance to see the performance of a number of different funds. Compare your fund's annual returns to the returns of funds in the same style category. Funds whose returns are greater than the average are known as outperformers. Funds whose returns are lower than the industry average are known as underperformers.

Compare Your Fund's Performance

This will help you determine whether your fund underperformed or outperformed the market as a whole. You may be better off investing in an index fund if your fund's performance lags the market.

References

• SEC: Invest Wisely: Mutual Funds