Picking an Investment Fund Based on Performance Comparisons

I’ve been trying to figure out the best way to pick out an investment fund. Here are some of my scattered thoughts.

Narrow down which funds track which index, and compare the performance. If it seemed like the fund regularly beat index performance, it tells me that the fund manager is tracking the index closely and is aware of market activities. However, just because a fund does not beat an index does not mean the fund is bad. It may mean that the manager took a risk that did not pan out. An example of a good fund that doesn’t match the comparative performance I would want is Vanguard Mid-Cap Growth Index Investor (VMGIX). As of right now, it has grown in the last 1, 3, 5 years at 15%, 9% and 11%. Sounds great! But when you compare it to the Nasdaq at 1, 3, and 5 it gets 22%, 15%, and 17%. Fidelity Nasdaq Composite Index Fund (FNCMX) gets 21%, 15%, 17% so close! Here’s a Virtus KAR Small-Cap Growth Fund Class A (PSGAX) where it gets 37%, 25%, 19%. There’s more out there but it takes time to find them.

Comments