If you want to determine whether to stick with the investment choices you’ve made or move some or all of your assets into different investments offered by your plan, you’ll have to consider information that mutual fund quotations and account reports don’t provide.
In order to keep track of your investments’ performance, you should compare your results with that of other funds within the same category, such as large-cap value or small-cap growth. Benchmarks, or averages that reflect the movement of a particular financial market or market sector, will give you an idea of how your funds are performing against the standard.
If your fund lags behind its benchmark for an extended period of time—for example, two or three years—you might want to consider replacing it. Just make sure that you’re comparing your fund to the right benchmark. Here are some standard benchmarks for the major market sectors:
 However, not all funds invest in just one segment of the market. For instance, a stock fund might invest in large-cap and mid-cap stocks—and keep a certain amount of its holdings in cash. And, no two actively managed funds own the same investments in the same proportions. Companies that specialize in analyzing fund performance use a process to determine the appropriate benchmarks. This process, called style analysis or returns-based style analysis, compares a fund’s returns with the returns of a number of asset classes.
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