What is an Investment Benchmark? - YouTube

what is a benchmark you know what are some of  the big standard ones and how do i make sure i'm  

using the right benchmark for my investments to  evaluate its performance yeah so that's you know  

what is a stock or bond market benchmark that  basically comes up quite often uh you know the  

one that i talk about on my show that i just  covered with the weekly summary is the s p  

500 i feel like if i have to follow one index  that everybody seems to know about that's the  

one i'd follow it's 500 stocks they're curated by  standard and poor's basically so they have to have  

some earnings and they have different criteria  and so they've kind of like a quality screen  

to get on there but it's fairly representative of  the overall market right because it's big enough  

and it's market cap weighted so the big companies  are going to have a bigger impact sometimes that's  

uh you know not always a good thing but versus the  dow which is the one that i hear about the most  

i mean i don't follow it honestly because it's  30 stocks i do follow it a little obviously but  

it's 30 stocks instead of 500 but it has a really  weird connect scenario because it started in 1883.  

it's actually price weighted it's weighted by  the price so a stock that has a higher price  

will have more impact on the dow and i don't know  what price has to do with anything because now you  

can split and all these things matter of fact i  just saw things saying that google and amazon now  

have a chance to get on the dow because they're  splitting uh and because their prices come down  

whereas before they couldn't get on the dow  because you know they would have dominated  

the dow they were so expensive two three thousand  dollars per share so that doesn't make any sense  

to me i don't know it's an interesting index so  and then the next one of course is the nasdaq  

which is a good index and has been a great  index to follow for periods of time it's a  

thousand stocks uh and it's mostly technology  oriented right so that's where you'll see  

kind of these tech stocks live you can kind of  tell what's happening in the growth stock arena  

by looking at what's happening with the nasdaq  and of course we've got the russell 2000 which  

is uh you know they have the wrestle 3000 which  is like most of the stocks on the entire market  

that one most people don't know about the  russell 1000 which is the bigger stocks again  

that's not when people know that much about the  russell 2000 is kind of that bottom two thirds  

uh it's 2 000 stocks and so if you're looking for  what's happening with small cap stocks that day  

that's what you'd be looking at in my opinion  those are the four biggies they're right there on  

yahoo finance every day one two three four right  just in that exact order now if you really want to  

do what we're doing in terms of benchmarking  in my opinion you go to vanguard and you use  

their existing mutual funds or etfs as your  benchmark because vanguard does an incredible job  

of including so many securities large cap mid cap  small cap micro cap which is not included in many  

and so the vanguard total stock market index is a  u.s index right and it has 4136 stocks on it now  

that changes all the time but  something around that number  

and it's the most broad index it's what we  benchmark our u.s holdings against right and  

then vanguard also has a total international  stock market index which is uh very good at  

replicating the entire international arena  emerging markets developed markets all of it  

and so that's how we benchmark any international  holdings that we have in the stock market  

and then if we have some that are kind of a mix of  u.s international that vanguard has a total world  

right which is the combination of both the total  u.s and the total international right so those are  

three for the stock market uh that's what we use  that's how we benchmark our clients have access to  

a portal where we use those as our benchmarks  and the reason i always use those is because  

anybody can go buy those you can't actually  buy the s p 500 you can buy a replica of it  

and you know that type of thing so you can go buy  vanguard for very inexpensive uh and don't have to  

pay somebody like us so we're trying to show you  know did we create value in our management or not  

after our fees and all those different types did  we beat the vanguard or did we not so and then of  

course just very quickly there's a total uh bond  market index uh b and d which is the ticker symbol  

for the etf is a very good representation of the  us bond market total international bond market  

uh would be for international bonds and  then total world right so there's six  

world stock u.s stock international stock world  bond international bond and us bond right so those  

six can really round out your benchmarking  if you really want to see how you're doing  

then use those indexes in my opinion i talk about  the s p 500 because that's what people know about  

right and so and of the four biggies it's the  one that makes the most sense to look at yeah  

and whenever you're evaluating performance you  also don't want to just check check one period you  

want to be checking you know how they're doing the  last couple months how they're doing the last year  

how are they doing the last three to five years  because you know maybe a stock is hot right now  

or it's cold but maybe it's overall performance  for the last three years has been really good  

yeah yeah i was just looking at  a client's account the other day  

and he was an early investor in facebook now  called meta and facebook has had a really hard  

time here in the last 12 months right i mean  really unbelievably uh underperforming say vti  

the total stock market index with vanguard yet  if you back that up just to three or five years  

he has a fantastic rate of return versus the  the overall stock market so yeah perspective  

on time periods is still pretty important  to take a look at and that's a good point