There was an interesting article in the WSJ this week about picking the proper index to compare your investing results against. One point it made was that comparing to the S&P 500 is often an improper benchmark since it is 500 large U.S. stocks, whereas a portfolio may consist of small caps, mid-caps, foreign, etc., all of which have done very well over the past few years.
Since the MFI Fund that I am maintaining is primarily small caps, with a very few mid-caps, a more accurate benchmark would likely be the Russell 2000 index. The article goes on to state that usually the best benchmark to use for your overall investment strategy is a combination of benchmarks to match your overall asset allocation strategy. (On a personal note, when I started my portfolio, I was primarily comparing it to the Fidelity Freedom target retirement fund that is a core holding in my retirement plan, since it is where I "would have" put this money had I not started investing under MFI, so that is basically a diversified benchmark).
Well, I'm going to stick to the S&P for a couple of reasons. One, I don't feel like tracking another benchmark (how's that for honesty?). Two, the S&P 500 and the Russell 2000 have not been so far apart as to make a difference for the amount I've been fortunate enough to beat them by this past year and 4 months. Three, most funds compare themselves to the S&P 500 so I'm really only being consistent.
But it's mostly the first reason. :)
-A
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