1.2.2.10 Portfolio Benchmarks
Portfolio managers often compare the performance of a portfolio to a benchmark. Benchmarks are often indexes that reflect a certain market of securities. An index is a basket of securities chosen from the market it is meant to represent. For example, a broad-based index is one that is meant to capture the performance of the entire market. Portfolio managers try to choose benchmarks that best represent the investments in a portfolio.
• The smallest broad-based index is the Dow Jones Industrial Average. It is the best known and oldest equity index in the U.S., but it tracks just 30 stocks. This is