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Home Finance Investing Judging the Performance of a Mutual Fund

Judging the Performance of a Mutual Fund

If you've been to Rush Week, you may have already run into "Alpha," the Greek letter that starts the alphabet and is emblazoned on frat sweatshirts across the country.

Wall Street guys went to college, too, which is why they sometimes use "Alpha" to describe a stock picking that worked out great. If a stock pick does better than a group of stocks that are related and considered the "market," you're dealing with an Alpha. For example, a high Alpha might be a portfolio of stocks that saw returns of 15% in a two-year period while the market of similar stocks saw returns of only 5%.

The good news? Even if you don't toss on a toga, you can still figure out how your mutual fund is doing. You can check your funds' performance online and compare it to other funds at any time. And you don't need a ton of math to figure it out—if the returns are as high or higher than you expected when you bought it, you're doing well.

Pro tip: mutual funds can go up and down in value and price. For some, it can be a bumpy ride. Make sure that you understand whether you've bought a more volatile or more stable fund, and if you plan to stay in for the long term. Otherwise, you might just find that you sell and leave the party early, before all the fun begins.

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