Fisher Investments Australia reviews how to benchmark your portfolio effectively

When Fisher Investments Australia reviews investing tools, we find amongst the most indispensable is a benchmark. What is a benchmark? And how do you use it? Read on to find out!

A benchmark is simply an index of assets (like stocks or bonds) broadly representative of the entire market. These common measures serve two purposes. One, you can measure your portfolio’s returns against them—a way to better assess how your decisions and/or positioning are influencing results. Two, and more importantly, a benchmark provides a guide for building your portfolio: a blueprint of the market’s various geographies and sectors. This makes assembling all the pieces you need for your portfolio to work over time much easier, helping you manage risk and maintain diversification.

But not any will do. A well-constructed benchmark should be diversified and market-capitalisation weighted with a proven history through several market cycles. Amongst Fisher Investments Australia’s reviews of myriad indexes, the ASX 200 is useful for tracking the Australian equity market whilst the MSCI World Index is a good global option. (We tend to prefer global indexes, as they offer more diversification options.) For those seeking to dampen short-term equity volatility, the Bloomberg AusBond Composite Index can make an appropriate reference for your bond sleeve.

After choosing representative indexes for your investments, blend them according to your desired asset allocation mix, which can help tell you what to own and how much. For instance, a 70% stock and 30% bond mix should be reflected by a 70/30 blended benchmark. Consider how an investor with such a blended benchmark comprised of the MSCI World and Bloomberg AusBond Composite Index can use this in practice. Global equities rose 18.5% in the 12 months through June 2025, whilst fixed interest gained 6.6%—resulting in a blended benchmark return of 14.9%.[i] If this investor’s personal portfolio performance over the same period was far out of line with the benchmark’s (either to the upside or downside), it could mean their positioning differs radically from the market—implying a lot of possible risk. This calls for looking under the bonnet to determine what caused the difference, in our view.

Enter the portfolio and risk management part. Your portfolio may differ from the benchmark, but it should be intentional. If what you own skews heavily to a few countries, sectors or companies compared to your benchmark, you may be subject to potential concentration risks—leaving your portfolio vulnerable to one or a few securities’ movements. Without a benchmark to reference, you might not even be aware of concentration risks at all! The investment discipline benchmarking instils is one of its greatest benefits when Fisher Investments Australia reviews the capabilities it unlocks.

Another benefit of benchmarking: Adjusting your allocations deliberately. A benchmark lets you gauge portfolio overweights and underweights against it. Say you expect America to lag. If your equity benchmark is the MSCI World Index, you could underweight your US holdings below its 72% weighting depending on your outlook.[ii] Your benchmark allows you to appropriately size strategic shifts so you don’t take too much risk—in case you are wrong! Then, you can measure the performance difference versus the benchmark. Instead of shooting in the dark, you will have a better sense of how well (or poorly) your investment decisions impact returns.

Finally, whilst a benchmark’s long-term historical returns are never guaranteed in the future, research Fisher Investments Australia reviews shows they offer a reasonable basis to set long-term expectations—again, particularly for those with reliable data through multiple market environments. Simulating the worst stretches, alongside the rest (the great to not-so-good periods), can stress-test your benchmark-based asset allocation, improving your prospects of—and confidence in—meeting your investment objectives when sticking to your financial plan.

In this way, a benchmark gives you an essential roadmap for keeping your portfolio on track over the long haul to meet your personal financial goals. Without one, based on Fisher Investments Australia’s reviews of investing best practices, you risk flying blind.