Choosing the Right Benchmark

A benchmark is the yardstick you measure performance against. Pick the wrong one and you can look brilliant or terrible for no good reason. Here is how to choose one, with real benchmark returns.

Apples to apples

A benchmark should hold the same kinds of investments you do. A small-company fund should be compared with a small-company index, not the S&P 500. An international fund belongs next to an international index. Comparing a tech-heavy portfolio with a broad index can make ordinary results look like skill.

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