The Only Three Questions That Still Count: Investing By Knowing What Others Don't, 2nd Edition

Better Living Through Global Benchmarking

Not all capital markets technology is about forecasting. It can also be a tool to keep you disciplined. One such mature capital markets technology alive and well in my firm (to which I’ve already alluded) is global benchmarking. This isn’t new, and I didn’t invent it! We spoke about benchmarking as a cure to many Stone Age ills in Chapter 3.

You may scoff at this idea of picking an index to follow and manage against and measure yourself against as being technology. It’s too simplistic and not a new concept—maybe too widely dispersed already. And anyone can do it! Yes, it is simplistic, and anyone can do it—but mostly, they don’t. And if they do, they usually do it wrong. If they did use it, they would likely have more success and make fewer errors. This is why it’s great. You can measure yourself against your benchmark, but more important, you should manage yourself against it.

Your inclination, like many US investors, may be to shy away from global investing, preferring to focus on the S&P 500 and US stocks and mutual funds. After all, you know America is better and are more comfortable with it. Cincinnati doesn’t scare you but maybe Tampico does. Still, it remains true global thinking helps you think better about everything, including understanding America better. One prime purpose of global benchmarking is to think better.

For example, many wrongly believe they don’t need to think globally or own foreign stocks because they can get the ...