Relevant Benchmarks
Chapters in this video
- 0:00 Why benchmarks matter: the index fund reality check
- 0:57 Adam the Advisor's four matching rules
- 1:58 S&P 500 as large-cap blend and the style trap
- 2:47 Russell 1000 Value, Russell 1000 Growth, and Russell 2000
- 4:04 MSCI EAFE, MSCI Emerging Markets, and the North America exclusion
- 5:23 Bloomberg Aggregate Bond and custom blended benchmarks
- 6:28 Positive alpha versus raw benchmark outperformance
- 6:55 Rapid-fire exam recap
What this video covers
- Why a benchmark must match a portfolio across four dimensions: style, market capitalization, geography, and asset class
- What the S&P 500 actually measures (large-cap U.S. blend) and why it fails as a benchmark for pure value, pure growth, or small-cap funds
- When to use the Russell 1000 Value, Russell 1000 Growth, and Russell 2000 indices instead of broader or blend alternatives
- What the MSCI EAFE covers (Europe, Australasia, Far East) and the critical exclusion of the U.S. and Canada from that index
- What the Bloomberg U.S. Aggregate Bond Index includes (investment-grade, U.S.-dollar-denominated, fixed-rate taxable bonds) and its high-yield exclusion
- How custom blended benchmarks work for multi-asset portfolios, and why the blend weights must mirror the portfolio's target allocation
- The difference between beating a benchmark's raw return and generating positive alpha through the capital asset pricing model (CAPM)
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