127 | The Line of "Free" Returns
When it comes to evaluating investment performance, it's easy to get confused with benchmarks.
How am I doing relative to the S&P 500? Or Apple? Or CDs? Or the Russell 2000? Or my neighbor?
On their own, none of these are particularly helpful benchmarks.
I'd argue that the benchmark is the investing strategy that requires the least time, attention, and money to implement.*
If you are invested in 100% stocks then you can compare your returns to the average of all the publicly-traded stocks in the world to confirm that you're capturing the "free" returns that are available to you (and everyone else!).
If you are invested in 100% bonds then you can compare your returns to the average of all the publicly-traded bonds in the world to draw similar conclusions.
And if you are invested in a blend of stocks and bonds, then there is a clear line connecting "all the stocks" and "all the bonds" that serves as The Line of "Free" Returns.
Of course, "free" is a loaded term.
Just because the financial cost of investing continues to trend to $0, doesn't mean there aren't psychological and emotional costs to investing - Morgan Housel describes the fact that nothing's free better than anyone.
Follow the link below to see how your personal investment performance compares to the "free" returns that are available to you.
And don't make Mistake #1 by assuming that your professionally-managed investments are capturing the "free" returns!
*In my mind, interest paid on cash in a bank account does not count as "investing". Nor does owning something that can't generate revenue (and profits!) for its creation of real human value in the world (i.e. gold, cryptocurrency, commodities, etc.) - those are better described as "speculating".