What are Portfolio Benchmarks and Why are they Important?

Ryan Wheless discusses portfolio benchmarks and why it is so important to understand what to benchmark your portfolio to.

A portfolio benchmark is a standard against which the performance of an investment portfolio can be measured. It is typically a market index or other benchmark that represents a particular asset class or group of assets.

For example, if an investor is trying to benchmark the performance of a stock portfolio, they might use the S&P 500 index as a benchmark. This index includes 500 of the largest publicly traded companies in the United States and is widely used as a benchmark for the overall performance of the U.S. stock market.

Using portfolio benchmarks can help investors assess the relative performance of their portfolio and make informed decisions about whether to make changes to their investment strategy. It’s important to note, however, that a portfolio’s performance should not be judged solely on how it compares to a benchmark, as other factors, such as an investor’s individual financial goals and risk tolerance, should also be taken into account.


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