Last month, Sarah Newcomb raised some points regarding the role that benchmarks, especially broad market indexes, should play in long-term investing. In this article, I’d like to comment on some of her points to bring more clarity to this important subject.
Why multi-asset portfolios need indexes
Portfolios designed to meet long-term investment goals, such as retirement, are almost always composed of multiple asset classes. In order to understand the long-term behaviour of each asset separately and together in a portfolio, we must use a set of asset class indexes, each index representing an asset class.
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