Kiplingers‘ Kim Lankford explains how to compare the performance of mutual funds and exchange traded funds with similar investment goals.
In her example, Lankford compares the Price Latin America fund (PRLAX) with the iShares S&P Latin America 40 Index Fund (ILF). While both funds had similar performance in the five years through 2008, the mutual fund outperformed the ETF in 2009.
Why? The mutual fund is actively managed and has a smaller concentration of large stocks in the portfolio. However, Lankford points out that the Price manager has only been on the job for a year and that the fund’s success will depend, in part, on his skill.