How to assess performance
A fund's past performance does not predict how it will perform in the future. However, it can give you an idea of how the fund has performed in different market conditions. You can assess the volatility of a fund's performance and decide whether you would be comfortable with that performance. You can also compare the fund's performance to:
- a relevant benchmark
- other funds in the same category
What is a benchmark?
Typically, a benchmark is a market or sector index against which you can measure the performance of the mutual fund. For example, if a fund invests mainly in Canadian stocks, the benchmark might be the S&P/TSX Composite Index, which tracks companies trading on the Toronto Stock Exchange. By comparing a fund to an appropriate benchmark, you can see how the investments held by the fund performed compared to the market or sector in general.
What is a category?
The Canadian Investment Funds Standard Committee developed fund categories for all Canadian mutual funds. Mutual funds with similar objectives and risks are included in the same category. Categories help investors make meaningful comparisons between funds.
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