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S&P as the standard
Old 12-31-2010, 05:35 AM   #1
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S&P as the standard

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I'm sick and tired of the S&P being used as the standard for the stock market. Every time is the same thing: Since <pick date that is most favorable to make your point> the S&P has underperformed <my monday quarterback pick>.
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I haven't check, but I'm guessing the S&P is probably the worst aggregate compared to other common indexes (russell 2000, etc).

Question, when they are quoting the performance, do they include dividends?

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Old 12-31-2010, 05:45 AM   #2
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Originally Posted by teejayevans View Post
Question, when they are quoting the performance, do they include dividends?
Answer: Sometimes. See 2010 US Stock Returns - Actual or Associated Press? - CBS

Here's a better set of benchmarks: Portfolio 30 | Index Funds Advisors Inc.

One can also look at the Vanguard site to get YTD returns of VFINX (S&P500) 14.9% and VTSMX (TotalStockMarket) 17.2%.

Another link of benchmarks: The Vanguard Target Retirement funds will be good benchmarks. Just pick a fund with the same amount of bonds as your portfolio has.

Then there is the whole bugaboo about how one actually calculates a number for a portfolio of many investments. Around this time of year people report, but who knows if their math is correct. Did they use XIRR(), Quicken, or MSMoney correctly? And folks often ignore parts of their portfolio when doing the calculation such as the $500K sitting in a money market fund earning 0.01%.

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Old 12-31-2010, 06:14 AM   #3
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Thanks LOL, I like the Allan Roth article.
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Old 12-31-2010, 07:35 AM   #4
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Well, the s&p is a better benchmark than the Dow.
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Old 12-31-2010, 08:34 AM   #5
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it's a good benchmark for large cap stocks that are actively traded on either the NYSE or Nasdaq.

It is included in the index of leading indicators.
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Old 12-31-2010, 09:14 AM   #6
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Never was this more true in my experience than in the 2000-02 market decline.

If you believe that the S&P (or the Dow for that matter) is "the market," you would have been down 1/3 or more at the bottom of the market in 2002.

But if, like me, someone also had a fair amount of "skin" in small caps, internationals, REITs, bonds, emerging markets and maybe even a small helping (3-4%) of gold stocks, they wouldn't have been down more than a 1/3 -- but only about 7% in total. That's about all I lost in that bear market" despite being about 2/3 invested in equities overall.

Granted, in the 2008-09 Ursa Major this broke down and just about everything except U.S. Treasuries collapsed in tandem. But that's not always the case.

Having said that, the S&P is a reasonable proxy for large cap domestic equities. But that's only one of many different asset classes in the equity arena, and they don't always behave the same way at the same time.
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Old 12-31-2010, 09:37 AM   #7
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iShares Russell 3000 Index (IWV) - ETF chart - MSN Money

The Russell 2000 has 8% of the total US Market capitalization by excluding the 1000 biggest stocks. The S&P 500 contains 75% of the market capitalization (value of stocks traded in the United States) Since 2000 it has been outperformed by the Russell 2000. However from 1981 to 2000 the S&P500 outperformed the Russell 2000 by 2-1, which is the period when the indexers showed the value of a simple no think investment in the S&P 500.

The reason the S&P500 is used for comparison is because it is where the majority of the dollars are invested in the stock market and it has been a familiar index fund for a long time. To use an index comprised of 8% of the stocks as a proxy for the stock market as a whole when comparing the performance of a given individual stock portfolio would not be I think correct. I could understand using the Russell 3000 but then again as the link above shows that index is very highly correlated in performance to the S&P500.

And comparing strictly the stock performance of a portfolio is to me superior to comparing a blended portfolio balance since comparing the blend does not lead to the information of how or why for the over performance or under performance, which is information I would always rather have.

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