Using Popular Funds as Portfolio Benchmarks

Before my days as a DIY investor, I mainly invested my money thru mutual funds and Exchange-Traded Funds (ETFs).

Back then, as a Canadian, some of my popular choices included XIU (iShares S&P/TSX 60 Index ETF) and RBF266 (RBC Canadian Dividend Fund) as I already was leaning toward dividend investing.

I now use these two funds as benchmarks to measure my performance as an investor.

Be careful here, I’m not advertising or promoting these two particular funds in any way. You should rather view them as examples or as proper representatives of their asset class. Many other funds could have been used and the illustration would have probably been pretty similar.

Some of you might think that beating these funds does not represent much of a challenge and that they constitute a pretty poor standards.

Avoid Over-Diversifying Your Mutual Funds

While investing in mutual funds, do not diversify too much.

Already Diversified Enough

By definition, a mutual fund is already diversified!

Indeed, the fund manager buys different titles with money invested by all shareholders of the fund.

Some specialized funds are a little less diversified but in general, mutual funds are a well diversified investment vehicle.

Limit Yourself to a Couple Funds

It is not necessary to select a large number of funds for your portfolio. Three or four different funds should be sufficient to meet your needs. In some cases, a single fund may do a great job.