How Well Have Large-Blend Funds Performed? It Depends.
A look at different approaches to calculating a category's average return.
How well have large-blend mutual funds performed during the past 10 years? That question is not as easy to answer as it might seem. At face value, the average trailing 10-year return for all mutual funds currently in the large-blend Morningstar Category was 5.97% at the end of September 2015. Not too shabby--considering the tremendous volatility the markets have experienced during the past decade. This number is displayed as the category average return in the Performance tab for individual funds on Morningstar.com. But more important than knowing what this figure is, or where it can be found, is understanding how it is calculated.
Digging a Little Deeper
The category average trailing 10-year return figure only accounts for funds that currently reside in the large-blend category. It does not know where these funds fell in our category system 10 years ago, nor does it care where they’ve been in the intervening decade. For example, what is today a large-blend fund might have been a mid-cap value fund at some point over the past 10 years. Also, the calculation only includes funds that survived the full 10 years. Nonsurviving funds are dropped from the calculation because they do not have a full 10-year return and thus cannot be included for purposes of calculating an average of trailing 10-year returns.