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Why The S&P 500 Is A Bad Benchmark

Are you tall? Your answer to that will likely depend on your own personal context.

For example, if you’re a 5’9” American male, and you’re comparing yourself to your American male peers, then you might say no. Why? Many of your friends are likely taller than you are, given that you’re a half-inch shorter than the average American male.¹

But what happens when you compare your height to all other men in the world? The global average height of men is 5’8 1/2″. So let’s ask again: Are you tall?

The lesson here is that we can’t let where we live play an overly important role when we’re trying to provide an objective, evidence-based answer.

Applying this concept to investing, let’s examine the importance so many investors attach to the S&P 500 or the Dow Jones Industrial Average. U.S investors tend to heavily measure their portfolio performance against American… Read More …