Summary: R-Squared is a statistical measure that is often included in a mutual funds prospectus. This measure is used as a historical measure that represents how closely a fund's movements correlate with a benchmark index. This is important to be aware of for a number of reasons. First, if you are looking to diversify your portfolio, buying a fund that is highly correlated might not achieve your desired result. Additionally, it's important to know R-Squared and the expense ratio of the fund. If you are paying 1.5% for a fund that has an R-Squared value of 98%, you are better off buying SPY which only has an expense ratio of 0.09%.
