What’s your benchmark?

When it comes to investing how do you know you’re winning? Typically you’d grab the latest copy of the AFR and compare your performance to the All Ordinaries Index. This index, though, is perhaps a poor proxy for performance. Chart 1 explains why. The local index is made up of around 30% resources companies, and nearly 40% financials. That level of exposure would never be considered prudent for the average investor. The Australian market is inherently riskier than, for example, the US-based S&P 500, which is far more diverse (see Chart 2). Most persist with using the All Ords out...

When it comes to investing how do you know you’re winning?


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