How do you know how your investments are doing?
If you are like most people saving for retirement, you will open up your statement when it comes in the mail and look at the bottom line. If the total is higher than it was in your last statement, chances are you are going to be happy. If it is lower, no doubt you will be unhappy and if each consecutive statement is lower than the last, you will likely be looking for a change of plans.
Comparing your statements from one quarter to the next does not give you a very clear picture of how effective your investment strategy is. While it is important to know if you are still on track to reach your financial objectives, a true measure of how well your portfolio is performing is to compare it against what is known as a benchmark. The real key here is to ensure that you are comparing your returns with the right benchmark.