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I'm new to investing, and have been trying to reconcile what various financial advisors recommend for long-term holdings. Some recommend sticking to passively managed index funds, claiming that few, if any, actively managed funds consistently track the market, let alone beat it; others recommend certain active funds precisely because they consistently outperform the market.

They can't both be right, so I fire up my trusty web browser and try to compare for myself. Unfortunately, I find the performance charts from various sources to conflict in the same way as the financial advisors. For example, consider 5-year performance of the ABALX mutual fund. On TD Ameritrade, I find the following performance chart, which (to my untrained eye) clearly shows ABALX lagging significantly behind S&P 500:

ABALX 5-year performance chart from TD Ameritrade

On the other hand, the same performance chart at CNN Money just as clearly shows ABALX significantly outperforming S&P 500:

ABALX 5-year performance chart from CNN Money

For additional confusion, Yahoo Finance conflicts with both of the previous charts:

ABALX 5-year performance chart from Yahoo Finance

TD and CNN agree on the performance of ABALX itself, but they disagree wildly on the performance of S&P 500... and Yahoo disagrees with both. I would have expected all these to be reliable sources, but something seems very wrong here.

Note: I chose TD, CNN, and Yahoo because they were the sites I could find that make it easy to generate charts; and ABALX because a financial advisor happened to mention it as a personal favorite. I've seen similar trends with almost every mutual fund and ETF I've looked at, though.

So my question: Which of these charts is correct? And in general, is there a better way to be comparing performance of a particular investment vs. "the market" that is less likely to lead to this sort of confusion?

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    I'm wondering if one of your charts includes the impact of dividends paid (and assumed to be reinvested), and the other includes price only, thus eliminating the benefits of dividends from the comparison. – Grade 'Eh' Bacon Sep 5 '17 at 13:19
  • TD Ameritrade advises: "The total return is not adjusted to reflect sales charges or taxes, however it does show actual ongoing fund expenses and assumes the reinvestment of dividends and capital gains." Since both charts agree on the performance of ABALX, I would assume CNN Money does the same. But clearly they interpret S&P 500 performance differently, and I haven't been able to figure out why. – Ryan Sep 5 '17 at 13:52
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    It's possible that ABALX simply doesn't pay dividends by default [instead they reinvest all dividends received automatically], thereby meaning that TD is comparing apples to apples, where CNN shows ABALX as including dividend reinvestment, but it shows S&P 500 excluding the impact of dividends. You should find the section on either CNN's site or ABALX itself which discusses how they treat this. – Grade 'Eh' Bacon Sep 5 '17 at 13:55
  • ABALX has a dividend yield of around 1.6%. I can't find anywhere specific in the ABALX prospectus, but I got the idea somewhere that performance reported in a prospectus always assumes reinvestment of dividends (it's a natural thing to do, and it makes them look better as well). Since the S&P 500 doesn't have a prospectus to borrow from, perhaps CNN got lazy and just went with historic stock prices? – Ryan Sep 5 '17 at 14:01
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    Just a terminological note: index funds are a type of mutual funds (or a type of ETFs). You are not deciding between index funds and mutual funds, but between index funds and actively managed funds. – BrenBarn Sep 6 '17 at 3:15
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tl;dr: The CNN Money and Yahoo Finance charts are wildly inaccurate. The TD Ameritrade chart appears to be accurate and shows returns with reinvested dividends. Ignoring buggy data, CNN most likely shows reinvested dividends for quoted securities but not for the S&P 500 index. Yahoo most likely shows all returns without reinvested dividends.

Thanks to a tip from Grade Eh Bacon, I was able to determine that TD Ameritrade reports returns with reinvested dividends (as it claims to do). Eyeballing the chart, it appears that S&P 500 grew by ~90% over the five year period the chart covers. Meanwhile, according to this S&P 500 return estimator, the five year return of S&P 500, with reinvested dividends, was 97.1% between July 2012 to July 2017 (vs. 78.4% raw returns).

I have no idea what numbers CNN Money is working from, because it claims S&P 500 only grew about 35% over the last five years, which is less than half of the raw return. Ditto for Yahoo, which claims 45% growth.

Even stranger still, the CNN chart for VFINX (an S&P 500 index fund) clearly shows the correct market growth (without reinvesting dividends from the S&P 500 index), so whatever problem exists is inconsistent:

CNN Money 5-year growth of VFINX vs. S&P 500

Yahoo also agrees with itself for VFINX, but comes in a bit low even if your assume no reinvestment of dividends (68% vs. 78% expected); I'm not sure if it's ever right.

Yahoo Finance 5-year growth of VFINX vs. S&P 500

By way of comparison, TD's chart for VFINX seems to be consistent with its ABALX chart and with reality:

TD Ameritrated 5-year growth of VFINX vs. S&P 500

As a final sanity check, I pulled historical ^GSPC prices from Yahoo Finance. It closed at $1406.58 on 27 Aug 2012 and $2477.55 on 28 Aug 2017, or 76.1% growth overall. That agrees with TD and the return calculator above, and disagrees with CNN Money (on ABALX). Worse, Yahoo's own charts (both ABALX and VFINX) disagree with Yahoo's own historical data.

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