Comparing a fund's performance to an index, such as the TSX, allows you to assess how well the fund manager is doing his/her job. Make sure that you choose the correct index to compare against. For example, bond funds should be compared against the Bond index, Canadian equities against the TSX, and U.S. equity funds against the Dow Jones Industrial Average.
Adjusted Net Asset Value - For the charts, we account for distributions by adjusting all of the historical prices prior to the distribution by the amount of the distribution. We take the same approach if a fund has a split. This gives us an adjusted NAV (Net Asset Value). In particular, the prices that are plotted do not necessarily reflect the actual price the fund was trading at on the dates shown.
In other words, when a fund pays a distribution, the shareholder receives more shares (or cash), while the price of the fund declines. The net effect to the shareholder, though, is zero. In order to account for this graphically, we adjust any historical prices downward by the amount of the distribution so that the user doesn't see a large drop on the chart the day the fund pays a distribution.
This way, any large
drops you see on the Charts are due to market swings that affect the share price
of the fund and not distributions. The Charts should not be used to gauge
specific fund prices but the performance of the fund over time.