What Is a Benchmark
My investment rose 10% this year. Did I do well? This question can't be answered, because 'compared to what?' is missing.
What is a benchmark
A Benchmark is the standard against which investment performance is compared. It's usually an index that represents the market. For Korean stocks it's the KOSPI, for U.S. large caps something like the S&P 500.
Having a benchmark lets you judge 'whether my performance is better or worse than the market.' A 10% return is good if the market rose 5%, and lagging if the market rose 20%. A return without a standard can't be interpreted.
Choosing the right benchmark
A benchmark must be 'of the same character' as your investment to be fair. Comparing to the KOSPI when you invested in U.S. tech stocks is meaningless. You must choose an index matching the asset class, region, and style.
Also, you must distinguish an index reflecting only price (price index) from one reflecting dividends too (total return index). If your return includes dividends but the benchmark uses only a price index, an illusion arises that makes your performance look better than it really is.
A common way to inflate performance is 'picking an easy benchmark.' You need the habit of first suspecting whether the comparison standard is appropriate.
A benchmark is a yardstick, not a target
It's healthier to view a benchmark as a 'yardstick for measuring performance' rather than a 'target you must beat.' Recklessly increasing risk to beat the benchmark can only enlarge the drawdown.
Especially for index investing, the purpose is to 'track' the benchmark. Because it's a strategy that captures the market return at low cost as-is, minimizing the difference from the benchmark (tracking error) is actually success. The meaning of a benchmark changes depending on the purpose.
常见问题
Q. Do individual investors need a benchmark too?
Yes. If you set one representative index that suits you, you can soberly check whether your choices (individual stocks, timing) beat simply buying the market. In many cases you'll confirm that it fell short of 'just buying the market as-is.'
Q. Can I use multiple benchmarks?
If your portfolio is made up of several asset classes, you can use a 'blended benchmark' mixing several indexes according to each asset's weight. For example, for a 60% stock / 40% bond portfolio, you'd compare against a standard blending the two indexes 6:4.
📋 结果基于历史数据计算,过去的收益不代表未来的收益。
📋 本服务旨在帮助理解投资、供教育之用,并非投资建议。