Much has been made about mutual fund performance figures and how certain pieces of data don't tell the full story when it comes to evaluating a fund. I would advocate not worrying about what a mutual fund's Morningstar Star Rating is because star ratings are assigned based on risk-adjusted past returns which are not indicative of future performance.
Further, it may also be a stretch to compare a fund to a certain benchmark because its mandate and overall investment policy may be drastically different than what the index's is. For example, a bond fund that does not invest in U.S. Treasury securities may be compared to a bond index with a heavy weighting towards Treasury securities. If U.S. Treasuries perform well compared to other global bonds, it may be a stretch to legitimately say the fund "outperformed" the index. On the other hand, a fund investing primarily in small-cap growth stocks may experience style drift and its strategy could begin to include beaten down companies that qualify as small-cap "value" firms.
A recent Wall Street Journal article noted that looking at total returns works best when you understand what a fund's expense ratio is and also when you look at fund returns over longer time periods in order to smooth out the effects of short-term market movements. However, even this approach isn't foolproof as the Journal notes; "even if a fund has outperformed for 10 years, its odds of outperforming over the following three to five years are only about 50-50, research by Vanguard Group suggests."
Overall, investors are best served by focusing on the index rather than on an actively managed fund. If you simply index your money, your index funds will own the entire market rather than cherry-picking certain securities. This strategy is beneficial because not only is it extremely inexpensive, you also won't have to worry about comparing your fund's performance relative to the benchmark because it is the benchmark.