Powered by Markit On Demand, and using data provided by Morningstar, the comparison tool uses a multi-factor model to identify the most comparable funds to the one(s) selected by the user.
- Fund choices are limited to one of the 69 categories defined by Morningstar (such as, but not limited to, Large-Cap Blend, Mid-Cap Value, Small-Cap Growth, World Stock, etc.) Fund choices are not limited to those covered by Morningstar analysts, but are limited to funds available for purchase through TD Ameritrade by retail investors.
- R-Squared values are used to find funds that track most closely with your selected fund (see definition below).
- Those funds with better risk-adjusted returns (over a 36-week period) and lower expense ratios and transaction costs are prioritized. Using this multi-factor model, the resulting funds are expected to perform comparably to the selected fund but may offer better risk-adjusted returns with lower expenses.
- Please carefully consider the investment objectives, risks, charges and expenses of all alternative funds presented. The tool can provide a lot of information; however the fund prospectus is the final authority, and should be read carefully before investing.
- Please note that there are significant differences between traditional mutual funds and Exchange-Traded-Funds (ETFs), and you should understand how these differences may affect your investment. Some examples include the fact that mutual funds are priced once, at the end of the day, based on the net asset value (NAV) of the underlying fund portfolio. ETFs are traded intra-day on an exchange, and the price you pay may differ from the NAV. You can often purchase shares of a traditional mutual fund for no transaction fee. ETF trades typically incur a commission. ETFs can entail market, sector, or industry risks similar to direct stock ownership.
Alpha measures the difference between a portfolio's actual returns and its expected performance, given its level of risk (as measured by Beta). A positive Alpha figure indicates the portfolio has performed better than its Beta would predict. In contrast, a negative Alpha indicates a portfolio has underperformed, given the expectations established by the portfolio's Beta.
Beta is a measure of a portfolio's sensitivity to market movements. It measures the relationship between a portfolio's excess return over T-bills and the excess return of the benchmark index. The market at large has a Beta of 1, which means a security with a Beta of less than 1 is less volatile than the market. Similarly, a security with a Beta greater than 1 is more volatile than the market.
R-squared ranges from 0 to 100 and reflects the percentage of a portfolio's movements that are explained by movements in its benchmark index. An R-squared of 100 means that all movements of a portfolio are completely explained by movements in the index. Thus, index portfolios that invest only in S&P 500 stocks will have an R-squared very close to 100. Conversely, a low R-squared indicates that very few of the portfolio's movements are explained by movements in its benchmark index. An R-squared measure of 35, for example, means that only 35% of the portfolio's movements can be explained by movements in its benchmark index.
The Sharpe ratio is a risk-adjusted measure developed by Nobel Laureate William Sharpe. It is calculated using standard deviation and excess return to determine reward per unit of risk. The higher the Sharpe ratio, the better the portfolio's historical risk-adjusted performance.
Standard deviation is a statistical measure of the range of a portfolio performance. When a portfolio has a high standard deviation, its range of performance has been very wide, indicating that there is a greater potential for volatility. By definition, approximately 68% of the time the total returns of any given portfolio are expected to differ from its mean total return by no more than plus or minus the standard deviation figure.