Welcome to the new morningstar.hk! Learn more about the changes and how our new features help your investing success.

The Market Is No Benchmark. Here's Why.

A long-term investment strategy can’t be properly assessed using a short-term metric.  

Sarah Newcomb 16 January, 2020 | 9:35

I recently heard someone say, “Beat inflation, not the market.” That got me thinking about how important it is to choose benchmarks for judging success that really fit the problem you are trying to solve. This is especially poignant now, since it's the start of a new year, and many of us are taking stock of 2019, looking at our goals and accomplishments, and making plans and adjustments for 2020.

We manage what we measure, adjusting our strategies based on our metrics of success and failure. It’s important, then, to know which measures are truly appropriate and which are red herrings. Looking at your own investment strategy, what is an appropriate measure of success or failure? Here, I’ll talk about why the overall market is the wrong benchmark, and what will serve you better, based on the current stage of your financial life.

Why Measuring Against the Market Doesn’t Make Sense
It’s easy to compare your annual returns to the returns of the overall market, mostly because you can find market-return information so easily. Every investment platform and news outlet reports market performance practically up to the minute, so the market’s return would seem to be a very important measure and a good way to judge if your own investments are keeping pace. This assumption doesn’t really hold up well under scrutiny, for a few reasons.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Member.

Register For Free

About Author

Sarah Newcomb

Sarah Newcomb  Sarah Newcomb is a behavioral economist with Morningstar.

Audience Confirmation


By clicking "accept" I acknowledge that this website uses cookies and other technologies to tailor my experience and understand how I and other visitors use our site. See "Cookie Consent" for more detail.

  • Other Morningstar Websites
© Copyright 2020 Morningstar, Inc. All Rights Reserved.      Terms of Useund      Privacy Policy.
© Copyright 2020 Morningstar Asia Ltd. All rights reserved.

Terms of Use        Privacy Policy        Cookies