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Tom Meaglia, ChFC®, AEP®, CLU®, MSFS

Chartered Financial Consultant

Investment Advisor Representative

CA Insurance Lic. #0567507

 

Meaglia Financial Consulting

2105 Foothill Blvd., #B140, La Verne, CA 91750

 

Toll Free: 800-386-3700

Bus:         909-593-6105

Cell:         818-681-8600

Fax:         909-593-6120

 

Email: tom@meagliafinancialconsulting.com

Website: www.meagliafinancialconsulting.com

January/February 2020

Measuring Up

Measuring Up

How do you compare a mutual fund’s* performance to its peers’? A mutual fund company may compare a fund to a benchmark whose makeup, ideally, bears the closest resemblance to the fund. A fund’s mix of investments by company size and its primary sectors, investing style and geography are among the pertinent factors needed to choose an appropriate benchmark.


Size
Size, or market cap in the case of stock funds, matters when comparing funds to ensure you compare apples to apples. The three main categories of stocks by size are large-cap, mid-cap and small-cap. You wouldn’t compare a fund with companies like Amazon, for instance, with one featuring small start-up companies. Bond funds might compare themselves to peers with similar average durations. For example, compare one-year to one-year and 10-year to 10-year maturities.


Sectors
Securities are also grouped into sectors, including energy, healthcare, financials and utilities. Which sectors dominate your fund is important to know because sectors perform differently in up and down markets. Healthcare may fare comparatively well in downturns because people need it, but sales of consumer discretionary products (like automobiles) may slow during this time. Bond funds may favor government, corporate, mortgage-backed securities and more.


Style
A mutual fund can be passive, such as an index fund, or active, with managers regularly buying and selling securities. One fund may concentrate on growth stocks, while another favors value equities. The latter is typically more stable and sometimes underpriced; the former is usually more volatile.


Geography
Some mutual funds invest by geographic region, comparing their performance to similar benchmarks. Examples include domestic mutual funds, which include only securities owned by U.S. entities, and international funds, which can include the rest of the world. Other geographically-based funds may concentrate on specific regions or countries, both developing and established.


* Investors should consider the investment objectives, risks, and charges and expenses of the fund carefully before investing. Contact the issuing firm to obtain a prospectus, which should be read carefully before investing or sending money. Because mutual fund values fluctuate, redeemed shares may be worth more or less than their original value. Past performance won’t guarantee future results. An investment in mutual funds may result in the loss of principal. Diversification does not ensure a profit or protect against loss in a declining market. There is no assurance that a diversified portfolio will achieve a better return than a non-diversifed portfolio. IMPORTANT: Investments in stocks, bonds and mutual funds, are not FDIC-insured and are subject to fluctuation in value and market risk, including loss of principal. Past performance is never an indication or guarantee of future results.


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Investment advisory services are offered through Fusion Capital Management, an SEC Registered Investment Advisor. The firm only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. SEC registration is not an endorsement of the firm by the commission and does not mean that the advisor has attained a specific level of skill or ability. All investment strategies have the potential for profit or loss.
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