- 1). Accumulate data on stock funds by using Yahoo's free finance data (see Resources below) or purchase a subscription from Morningstar or one of the other mutual fund review services. Compare total fees to the fund's total return. The lower the number, the better the return per dollar of expense.
- 2). Collect data to measure absolute total return. In column one, enter the current price per share. In column two, enter the amount of dividends received. In column three, enter the change in price for the year. Create column four, Total Return, as the sum of columns two and three. Divide column four by column one to create column five, to represent the return per dollar invested.
- 3). Rank the results according to the formula in step two by fund. This will rank the relative performance of the mutual fund compared with other funds. Take this analysis a step further by ranking funds by purpose. Rank funds by purpose, size, domestic or international investing, growth, value, or income and capital gain (blended mutual fund). Do not expect the best fund in a weak sector to outperform any fund in a strong sector.
- 4). Compare all funds, using step two, to all funds of the same purpose or type. Use this peer classification to determine if your portfolio management is capable of being a leader in its sector. Judge fund performance by the purpose of the fund first, then by the size of the fund. Larger funds tend to under-perform smaller funds.
- 5). Use the spreadsheet program created in step two and add a column six for high price. Create column seven for low price. Subtract column seven from column six and input the results in column eight. Make column eight the Fund Range for the year. Divide the closing stock price, column one, by column eight. Input the result in column nine as Fund Volatility. Volatility is a prime measure of risk. Rank all relevant funds by volatility and total return to the best performers.
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