Question

Given the way you invest financially, does it make more sense for you to pay attention to the TSX or to some other stock market index? Why?..

Answer 1

YES, Investors often use the S&P 500 index as an equity performance benchmark since the S&P contains 500 of the largest cannadian publicly traded companies(TSX). However, there are many types of benchmarks that investors can use, depending on the investments, risk tolerance, and time horizon.

BENEFITS OF USING A BENCHMARK INDEX FOR COMPARISON-

The main advantage is, since they merely track stock indexes, they are passively managed.

Academic studies have shown index funds outperform active management funds over time. Even a manager who consistently beats the market can show diminishing performance. Thus, it often makes sense for many investors to include index for comparisonof their portfolios.

Another benefit of index funds is that they allow investors to achieve their goals relative to benchmarks more consistently.