Using Benchmarks to Find Good Stocks
Finding quality stocks and mutual funds is a difficult job, especially for long-term investors who want to secure their future by investing in a quality stocks or fund. One way of doing so is to compare the price and growth rate with an already estimated benchmark.
Although any stock or index can take as a benchmark it is better to choose one with reasonably steady growth and is liquid enough to trust. The best option is the S&P 500 index; it is old and is growing every year with a reasonably constant speed, around 11% annually and around 100% in every 10 year. By taking this index as a benchmark you can classify stocks and mutual funds in to 3 main groups as those performed better than the S&P 500 index, those performed worst than S&P 500 index and those which are unstable to fit in any previous groups. Now the options before a trader will be much more clear, only look for stocks which outperformed the benchmark consistently.
It is better to put money on firms or funds which are old enough to compare and also consider periods of market recession and the stability of these stocks. This method of using benchmark to find stocks usually benefit long-term investors only.
Although any stock or index can take as a benchmark it is better to choose one with reasonably steady growth and is liquid enough to trust. The best option is the S&P 500 index; it is old and is growing every year with a reasonably constant speed, around 11% annually and around 100% in every 10 year. By taking this index as a benchmark you can classify stocks and mutual funds in to 3 main groups as those performed better than the S&P 500 index, those performed worst than S&P 500 index and those which are unstable to fit in any previous groups. Now the options before a trader will be much more clear, only look for stocks which outperformed the benchmark consistently.
It is better to put money on firms or funds which are old enough to compare and also consider periods of market recession and the stability of these stocks. This method of using benchmark to find stocks usually benefit long-term investors only.
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posted by Daniel Pipitone at
6:48 AM
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