Benchmark

When evaluating investment performance, it's often helpful to compare the results to some kind of benchmark. Otherwise it can be tough to know if your investment decisions are adding or subtracting value. It's important that the potential investments that comprise the benchmark are inclusive of the investments you will be selecting for your portfolio. Otherwise, you could 'go outside' your benchmark to make investments and the comparison would not be as relevant. For instance, if my benchmark were say the Dow and I go purchase a bunch of brazilian stocks, then my results may exceed those of the Dow Jones Industrial Index, but the comparison would be irrelevant because the risk profile of my investments would be nothing like the risk profile of the stocks comprising the Dow.

Since I think it's beneficial to be as diversified as possible, I don't want to limit my 'investment universe' and will be amenable to purchasing stocks with any geographic, market cap, or sector characteristics. Therefore we need a benchmark that is similarly unlimited. To that end, I like the following:

Ticker: ACWI - This is an Exchange Traded Fund (ETF) that seeks to mimic the performance of the MSCI All Country World Index, which is designed to measure the combined equity market performance of developed and emerging markets countries, and was developed by MSCI Inc. as an equity benchmark for global stock performance. This is a passive benchmark, meaning the manager does not attempt to buy and sell various investments in an attempt to 'beat the market'.

Ticker: VT - This is an ETF that seeks to mimic the performance of the FTSE All-World Index, which includes approximately 2,900 stocks of companies located in 47 countries, including both developed and emerging markets, and was developed by Vanguard as an equity benchmark for global stock performance. This ETF is also passively managed.

Ticker: FWWFX - This is a Mutual Fund that seeks growth of capital (invests in growth stocks). The fund's equity investments may include established companies and new or small-capitalization companies. Although it may invest anywhere in the world, the fund mainly purchases securities of issuers in developed countries in North America, the Pacific Basin, and Europe. The fund may invest in debt securities of any rating. It may also invest in closed-end investment companies. This mutual fund is actively managed.

Lastly, although I don't consider it an appropriate benchmark, I've included a graph of the watch / model portfolio vs. the S&P 500 index, which contains 500 of the largest companies in the U.S., just because a lot of people are U.S. centric in their investing mindset and would want to know where we stand vis-a-vis this metric.