Relevant Benchmarks

What this video covers

• What a benchmark is and why the wrong benchmark can make a mediocre manager look brilliant or a skilled manager look terrible
• The S&P 500, Russell 2000, Wilshire 5000, MSCI EAFE, and NASDAQ Composite: what each covers and that all are market-cap weighted
• Why the Dow Jones Industrial Average (DJIA) is price-weighted, not market-cap weighted, and why this is one of the most tested traps on the exam
• Equal-weighted indexing and how the S&P 500 Equal Weight Index gives every component identical influence regardless of size
• The Bloomberg U.S. Aggregate Bond Index ("the Agg") as the standard fixed-income benchmark and the Consumer Price Index (CPI) as the inflation benchmark for real returns
• The golden rule of benchmark selection: matching the portfolio's investment style, asset class, and risk profile to the appropriate index
• Why comparing a small-cap value fund to the S&P 500 is misleading and overstates manager performance based on risk taken