Devoted to understanding the basics and fundamentals of investing

There was an article in the Wall Street Journal today on how lots of investors are beating the S&P 500 index over the last 5 years.  If you define the S&P 500 as the market, then you are beating the market.  But if your holdings are different than those in the index, then it might be the wrong measurement.

What you have is a benchmark problem.  What do you measure yourself against?  How do you know if you or your portfolio manager is doing a good job?  This is actually one of the biggest questions on Wall Street today.  It is brought on by the large fees Hedge Fund managers charge.  Hedge Funds normally charge 20% or more of out performance.  So deciding what to measure against becomes critical. 

If you have a portfolio made up of various mutual funds, you would want to measure their performance against other funds with similar styles.  For example, measuring a growth stock fund against the average of all growth stocks.  Or, for another example measuring a small cap stock fund against the average of all small cap funds.  That way, you are measuring apples to apples and can tell if you really have good performance or not.  Instead of measuring against just one benchmark you may need to measure against several.

Now go out there and make some money.