181) If Your Investment Under Performed the Benchmark, is it Good News or Bad News?
As an investor, you want your investment to give the highest return and have little or NO Risk. Not only that, you want the returns to be fast. In addition, you don't have to work or think too much about it.
The BEST is when you just put your money, it become double overnight while you sleep peacefully.
Even BETTER if the money became 10 or more times overnight.
Click here for more about the 4S of Investment.
http://highlevelrules.blogspot.com/2017/06/what-investors-want-in-their.html
Wake up, it was just a nice dream!!!
Well, everybody wants this for his or her investment. How wonderful it is, if you have a goose that lays a golden egg every morning. After laying the golden egg, the goose takes care of itself. No need to feed or clean its cage. Even can defend itself from other neighbors, thieves and the government secret service people, that try to steal the goose from you. The goose will always be loyal to you and you only. On top of that, the goose lives forever.
Wake up, it was just another wonderful wish!!!
OK, now let's go back to reality and back to the topic of the day.
If Your Investment Under Performed the Benchmark, is it Good News or Bad News?
If you ask yourself what do you really want, the main want is to have more money from your investment. The more the better.
Then, why is there a benchmark?
It is there to give you a comparison of the investment's performance. With a benchmark, you can compare whether your investment performed better or worse than the general market.
Although there is a benchmark, your investment is not exactly the same as the benchmark it used. The investment has more varieties and more complicated than the benchmark.
Let's compare your investment with the Stock Market Index. Your investment may be only consists of 3 companies stocks. The 3 companies are not the same as the index. An index can consists of 30 or more companies.
For example, the FBM-KLCI consists of the top 30 large listed companies of Malaysia. The S&P 500 (Standard & Poor's 500 index) consists of the largest 500 publicly traded companies in USA.
More details from this link: https://www.investopedia.com/terms/s/sp500.asp
If you invest into a fund, the fund may have more than 50 different stocks. In addition, the fund also invests into different countries. Besides stocks, the fund may also invests into other assets like bond and money market instruments.
The components of stocks, bonds and money market instruments keep changing as the fund is being traded. The fund manager will buy and sell according to their investment strategies.
As compared to an stock market index, the component companies are fixed, until the next review. The review normally done 2 times a year.
You may sometimes get the fund performed lower or worse than the index (benchmark).
Does it matter?
Your main final objective is to have more money. You should be happy, as long as the investment provided a good return. Even though the return is lower than its benchmark.
Click link below to know Why Equity Fund Performance Different From Benchmark.https://highlevelrules.blogspot.com/2017/07/why-equity-fund-performance-different.html
If you compare to other benchmarks, your investment returns may be higher than another benchmark.
Besides investment returns, you should also compare the risks involved. They had always say,
"Higher Return, Higher Risk."
The Stock Index Benchmark only consists of the component stocks. No Bond, no Money Market.
Invest into a fund that consists of stocks, bonds and money market instruments. A fund that invests into different countries and actively managed by its fund manager. A fund that allows you to do regular top ups.
When your fund has asset allocation, diversification and dollar cost averaging strategies, your investment is at a lower risk than its benchmark.
So, in conclusion,
If Your Investment Under Performed the Benchmark, is it Good News or Bad News?
It depends on the final returns you get, at the risk you can tolerate.
As long as the investment makes money, it is GOOD news.
More related articles:
Is it necessary to beat the benchmark?
http://utclist.blogspot.com/2018/06/is-it-necessary-to-beat-benchmark.html
Different Benchmarks Between Investors and Funds
http://highlevelrules.blogspot.com/2018/05/different-benchmarks-between-investors.html
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