How to Choose the Right Portfolio Benchmark
Comparing performance to the wrong benchmark leads to misleading conclusions.
Benchmark Selection Principles
1. Match Asset Class
Stock portfolio → stock index Bond portfolio → bond index Balanced portfolio → blended benchmark
2. Match Geography
US stocks → S&P 500 or Russell 3000 International → MSCI EAFE or ACWI Emerging markets → MSCI EM
3. Match Style
Large cap growth → Russell 1000 Growth Small cap value → Russell 2000 Value Core → Broad market indices
Common Benchmarks
| Portfolio Type | Suggested Benchmark |
|---|---|
| US Large Cap | S&P 500 |
| US Total Market | Russell 3000 |
| International | MSCI EAFE |
| Balanced 60/40 | 60% S&P 500 / 40% Aggregate Bond |
| Global | MSCI ACWI |
Creating Blended Benchmarks
For diversified portfolios:
- Weight benchmarks to match allocation
- Rebalance benchmark monthly
- Use same methodology consistently
BOFFO Benchmark Features
- Pre-built common benchmarks
- Custom blended benchmarks
- Automatic benchmark returns
- Attribution analysis