With all due respect to my dueling partner, Tim Beyers, beating a benchmark only has meaning if you're looking at the right one. Over a lifetime, managing to barely beat Vanguard's Short-Term Bond Index (FUND:VBISX) should be an embarrassment for a stock investor. It might feel good to be able to claim to have beaten an index, but so what? Making the wrong comparison when you're looking at total, risk-adjusted returns is a great way to delude yourself into thinking you're doing better than you really are.

Likewise, when looking at an actively managed mutual fund, investors should compare that fund with an appropriate benchmark. There may just be a better investing opportunity in the right comparison index fund. For instance, consider the case of Tweedy, Browne Global Value (FUND:TBGVX). It has easily outperformed the S&P 500 over the last eight or so months. Yet that fund is an international fund, not a domestic one, whereas the S&P 500 is an entirely U.S.- based index. A more appropriate comparison would be something like Vanguard's Total International Stock Index (FUND:VGTSX). Lining the Tweedy, Browne fund up against an appropriate index and the Spyders (AMEX:SPY), an investable proxy for the S&P 500, shows the importance of proper benchmarking:

Investment Price on
8/12/2004		 Price on
4/20/2006		 Distributions
Received		 Total
Return
SPY $106.98 $131.13 $4.06 26.4%
TBGVX $21.20 $28.88 $0.64 39.2%
VGTSX $10.51 $16.21 $0.55 59.5%


While it is true that the Tweedy, Browne fund easily outpaced the S&P 500, it seriously lagged an international index that would have been a more appropriate comparison. If you're looking for an aggressive, international style to improve your potential returns, that's fine. Just be sure to check your choices against an appropriate benchmark to see how well you're really doing.

Think you're done with the Duel? You're not! Go back and read the other three arguments, and then vote for a winner.

At the time of publication, Fool contributor Chuck Saletta had no ownership stake in any of the companies or funds mentioned in this article. The Fool has a disclosure policy.