Investment company sales literature used comparisons of the performance of the stock of a particular company with an index of security prices, commonly called a market average. The Securities and Exchange Commission's Statement of Policy of August 1,1950, declared it to be misleading to use any comparison of an investment company security with any other security or medium of investment or any security index or average without pointing out: (1) that the particular security or index or average was selected by the person making the comparison; (2) that the results should be considered in the light of the company's investment policy and objectives, the characteristics and quality of the company's investments, and the period selected; (3) any other factor necessary to make the comparison a fair one from the standpoint of the investor. Another point in the Statement of Policy emphasizes a serious danger to be guarded against. For comparisons to be either fair or worthwhile, similar companies have to be compared or adjustments must be made for the differences. For example, in a rising stock market, a balanced fund, with 40 per cent in common stocks and 30 per cent each in investment quality bonds and preferred stocks, is obviously likely to show less increase in net asset value than a 100 per cent common stock fund. On the other hand, a common stock fund has not necessarily made a poorer performance because its asset value declined by a larger percentage in a declining stock market than that of a balanced fund with the characteristics mentioned above.

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