What is Benchmarking?

May 12, 2020

During client reviews, we often discuss how are we doing in relationship to the market.  In addition, when our clients look at their monthly reports, they are looking to see how their accounts have changed compared to the market.

The big question is “What is the Market”?  What is mainly reported in the financial media is the US large companies represented by the Dow Jones or the S&P 500.  For most people, that is how you compare your returns.

Fortunately, or unfortunately, the market is made up of many asset classes, Large, Medium, Small, International and Fixed Income.  Depending on your risk tolerance, you will have some combination of these asset classes.  The allocation among different classes is meant to diversify risk as well as return.

The US equity market has been doing very well lately.  However, not all asset classes have done as well.  Fixed Income, International and Real Estate have all seen a decline, especially since the election.  Your portfolio return will reflect the favorable return of the US market but it will also be offset by other categories.

I have attached a nice summary from LPL that discusses both appropriate benchmarks as well as diversification benefits and penalties. 

I encourage you to read it to help understand your portfolio performance. However, if you don’t have a chance to read it, we will review it at our next review.

This commentary was created by Aspire Planning Group and is for informational purposes only. The views expressed are based on current market conditions and are subject to change. The commentary does not take into account any investor’s particular investment objectives, strategies, tax status, or time horizon. There are no assurances that the techniques and strategies discussed are suitable for all investors or that the predicted results will occur. The commentary does not constitute investment advice, tax advice, or legal advice. All investments are subject to risk, and past performance is no guarantee of future results.
Aspire Planning Group, LLC is a d/b/a of HighPoint Advisor Group, LLC (HPAG), a registered investment advisor. For current HPAG information, please visit www.advisorinfo.sec.gov and search by CRD#163768.