Ken Fisher Explains How a Benchmark Helps Keep Your Portfolio on Track to Reach Your Goals

Описание: #investing #benchmark #benchmarking

When driving, you usually want some help to stay on the road—for example, proper road lines and lighting. Without something guiding you, how can you know if you are on track to get to your destination? The same goes for investing. A benchmark provides a way for you to evaluate if you are on target to meet your goals.

So how do you find the right benchmark for your investing needs? A benchmark should typically be a broad, well-constructed index. There is no single benchmark that covers everyone—your benchmark may differ based on where you are putting your money—stocks, bonds, cash or a mix. It could be one index or several in proportion to your asset allocation. An appropriate benchmark should reflect your particular asset allocation so that you can properly evaluate how you are doing.

Having an appropriately selected benchmark can also help with managing your portfolio. When you think of the individual components of your benchmark compared to your portfolio, you can gain insight into what kind of risk you might be taking. If your portfolio differs significantly compared to any particular part of your benchmark, you can take that as a trigger to think carefully about why it is diverging—and if there is risk involved. If you veer too far from your benchmark ask yourself why, and if you will still be on track to get to your long-term goal.

If you missed Ken discuss the importance of investing in a 401(k), watch it here.
   • Ken Fisher Answers: Why Should I Invest in...  

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