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Simple But Not Easy: An Autobiographical and Biased Book About Investing by Richard Oldfield

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Chapter 6 – Benchmarks

Benchmarks, like fees, are boring. Benchmarks are likewise important. They have attracted a bad name in the last 10 years or so because they are seen, quite correctly, to have led managers to index-cling in the way described in the last chapter. They have been used as the drunk uses a lamp-post, for support rather than illumination, and during a period in which markets went down provided little of either.

This index-clinging is voluntary. The index does not have to be slavishly imitated. There is, anyway, an important distinction between a benchmark which is a composite of various indices, and a benchmark which is just one index on its own. As discussed, most stock market indices (though now not all) are composed of ...

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