There are two figures you can use to compare the performance of your mutual fund to other mutual funds or market indices: adjusted or unadjusted returns. Which should you use?
Returns are shown on your investment account statement. In reviewing it, you may notice sets of figures for each fund’s average annual total returns. One is adjusted for the maximum sales charge, and the other is unadjusted.
Why are there two numbers? The Securities and Exchange Commission (SEC) mandates that mutual funds show both figures to allow investors a fair and accurate comparison between funds or between a fund and a market index. But many shareholders wonder which number to use to assess the performance of their individual investments.
Both figures show the performance of a fund during the time periods indicated, taking into account changes in share value and assuming reinvestment of all income and capital gains distributions. But unadjusted figures do not account for sales charges. Adjusted figures factor in the effects of the maximum sales charge that can be applied to a certain share class.
Which should you use? Well, you want to reflect sales charges if you paid them. But the adjustment for a maximum sales charge may not provide an accurate barometer for your particular situation. Sales charges are sometimes waived or reduced. For example, for certain share classes, the maximum sales charge applies only if you redeemed your shares during the first years of your investment. In other words, because both unadjusted and adjusted performance figures are standardized, you may find that neither precisely reflects your own investment experience.
Do you want guidance on your individual portfolio’s actual performance? If so, it might be worth a conversation with us. We can help you understand your individual performance. Please call or email today.