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WIKI ANALYSIS| This article is part of WikiProject Definitions. Consider editing to improve it. View articles referencing this definition. |
Benchmark
A benchmark is a proxy for a market, economy, class of equity, or sector, generally setting a standard against which the performance of a stock, bond, mutual fund, commodity, or other security is measured.
Benchmarks are also used to gauge the health of a market, sector, or entire economy.
Examples
- The S&P 500 (.SPX-E) and Dow Jones Industrial Average (.DJIA) are often used as benchmarks for the United States economy in general. That is to say, their performance is used both to gauge the health of the economy and as a reference of comparison for the performance of a stock portfolio or mutual fund.
- The Nikkei 225 (NK225-OK) is used as a benchmark for the Japanese economy.
- The Indice Bovespa (IBOV11-BR) is used as a benchmark for the Brazilian economy.
- The TSE 300 is used as a benchmark for the Canadian economy.
- The CAC 40 (CAC40-FR) is used as a benchmark for the French economy.
- The DAX Index (DAX-XE) is used as a benchmark for the German economy.
- The Hang Seng Index (HSI-HK) is used as a benchmark for the Hong Kong economy.
- The IPC Index (IPC-MX) is used as a benchmark for the Mexican economy.
- The SSE Composite Index (SHGIDX-SH) is used as a benchmark for the Chinese economy.
- The FTSE 100 Index (UKX-LN) is used as a benchmark for the UK economy.
- The Straits Times Index - STI (STRAITS-SG) is used as a benchmark for the Singapore economy.
- The All Ordinaries Index (XAO-AU) is used as a benbhmark for the Australian economy.
Benchmark
A real benchmark |ˈbɛntʃˌmɑrk| is an unmovable surveyor's mark cut concrete or stone, and used as a reference point in measuring altitudes. There is no such thing as a floating benchmark. [1]
From an investors view, cash is used as a benchmark to gauge the returns on there principal, and governments use cash as a benchmark to levy there taxes on.
Wall Street uses benchmarks that they make up themselves to justify their fees. [1] Generally, the earnings multiple for the market as a whole is a helpful benchmark. [2] Benchmarks are a smokescreen used by Wall Street to distract investors from gauging their investment returns against cash. Comparisons are fraught with peril, because a fund can look unjustifiably good or bad if it is compared with the wrong index. [3] Investors are concerned with absolute, not relative risk and return. Minimizing risk is about diversification. [4]
From "surveyor's point of reference," 1838, [2]
References
- ↑ Wall Street words: an A to Z guide to investment terms for today's investor By David Logan Scott ISBN-10: 0618176519 pg364,<ref> The fee increases or decreases proportionately with the investment performance for the fund compared to the index. <ref>Mutual Funds: An Introduction to the Core Concepts by Dr. Mark Mobius ISBN-10: 0470821434 Chapter 1</li> <li id="_note-1">[[#_ref-1|↑]] A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing By Burton Gordon Malkiel ISBN-10: 0393062457 pg122</li> <li id="_note-2">[[#_ref-2|↑]] Mark Hulbert, New York Times, January 8, 2006</li> <li id="_note-3">[[#_ref-3|↑]] Dean LeBaron's Treasury of Investment Wisdom: 30 Great Investing Minds by Dean LeBaron and Romesh Vaitilingam ISBN-10: 0471152943 pg118</li></ol></ref>
See Also
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