You've learned to accept the ups
and downs of investing in the stock market. You understand
that even sound, high-quality investments can fluctuate
in value — sometimes significantly. Then you may be
asking yourself how you can gauge how well you're doing
as an investor, if not by any absolute measure of annual
gains or a portfolio that never loses value.
This is where benchmarks can help. A benchmark is an index, average,
or other measure, the movement of which serves as a standard,
or basis of comparison, for evaluating the performance of
the overall market. Investors and financial professionals
use benchmarks as a gauge against which they set their market
expectations, and judge the performance of individual securities,
market industries and sectors, and the performance of different
securities portfolios.
The Standard & Poor's 500-stock Index (the S&P 500)
and the Dow Jones Industrial Average (the DJIA or the "Dow")
both track the performance of large-cap stocks and are the
most widely followed benchmarks of the U.S. stock market.
There are also benchmarks for international markets, different subclasses of securities, for instance small-cap stocks, and for other
types of investments such as bonds and mutual funds. Sometimes
current yields and interest rates are used as benchmarks
— such as the yield on the 10-year Treasury note for
fixed-income securities and the current interest rate for
30-year mortgages.
Popular
benchmarks
Bonds and other
fixed income investments
Current 10-year Treasury note yieldLehman Brothers Intermediate Government/Corporate Bond Index
The NASDAQ Stock Market®
NASDAQ Composite Index
Technology stocks
Goldman Sachs Technology Index
Overall market
Wilshire 5000 Index
International stocks
Morgan Stanley Capital International Europe, Australasia, Far East (EAFE) Index
Jeremy Siegel, The Wharton School 