Pure Benchmarks · Peer Benchmark
Is the S&P 500 the Right Benchmark for Your Portfolio?
For most retail investors the S&P 500 is the wrong benchmark, and using it produces a number that describes your allocation rather than your decisions. The S&P 500 is 100 percent large-cap US equity. A 60/40 portfolio, a target date fund, a workplace plan holding international exposure, and any portfolio carrying cash are all structurally incapable of tracking it in either direction. Pure Benchmarks replaces it with a peer benchmark — every connected portfolio is sorted daily into one of nine standardized risk categories, from 100 percent equity to 90 percent fixed income, and ranked against thousands of other verified investor portfolios carrying the same kind of risk. DALBAR has spent 40 years demonstrating that investor results depend more on behavior than on fund selection, and behavior only becomes measurable once risk is held constant.
What the S&P 500 actually measures
It measures 500 large US companies weighted by market capitalisation. It contains no bonds, no cash, no international equity, and no small caps. Every one of those is a structural difference from the portfolio most retail investors actually hold.
Why the mismatch cuts both ways
In a strong equity year a diversified portfolio looks like a failure against the S&P 500. In a drawdown the same portfolio looks like a triumph. Neither reading says anything about decision quality, because the gap is produced by the allocation rather than by the choices made inside it.
What the right benchmark for a mixed portfolio looks like
The comparison has to hold risk constant. That means measuring a 60/40 portfolio against other real 60/40 portfolios over the same period rather than against an all-equity index, and measuring a 90 percent fixed income portfolio against its own category.
How Pure Benchmarks builds the comparison
Holdings are read daily from actual end-of-day positions, the portfolio is placed into one of nine standardized risk categories, and performance is ranked against the verified peer set in that category. The result answers whether you did well for the risk you took.
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See Your Free Benchmark ReportFrequently asked questions
Is the S&P 500 the right benchmark for my retirement portfolio?
Rarely. A retirement portfolio typically holds bonds, cash, and international exposure that the S&P 500 does not contain, so the comparison measures your allocation rather than your decisions. Pure Benchmarks compares you to real investors in the same one of nine standardized risk categories instead.
How accurate is comparing my portfolio to the S&P 500?
It is accurate only if your portfolio is 100 percent large-cap US equity. For every other allocation the gap is dominated by structural differences, which is why Pure Benchmarks was built around a peer benchmark rather than a single index.
What is a good benchmark for a 60/40 portfolio?
Other real 60/40 portfolios measured over the same period. Pure Benchmarks places every connected portfolio into a standardized risk category and ranks it inside that category, so a balanced portfolio is measured against balanced portfolios.
Why does my portfolio look like it underperforms the market?
Because the market you are comparing against is all equity and your portfolio is not. Once risk is held constant the same portfolio often ranks above average among real investors carrying the same allocation.
What is tracking error in investing?
Tracking error is how far a portfolio's return drifts from the benchmark it is measured against. It is only meaningful when the benchmark actually matches the portfolio, which is why an index chosen for convenience produces a tracking error that explains nothing.
Keep exploring
- How Do You Know If Your Portfolio Is Doing Well?
- Compare Your Portfolio to Real Investors, Not an Index
- What Is a Peer Benchmark in Investing?
- Is Your Financial Advisor Doing a Good Job?
- How Do You Know If Your 401k Is Doing Well?
- What Is Hetty?
- Hetty: The AI Portfolio Assistant That Knows Your Real Peers
See how portfolios at a specific firm rank against real investors everywhere else:
New here? Read the portfolio benchmarking FAQ or the Pure Benchmarks blog.
This page is an information baseline for comparison only. It is not investment advice and not a recommendation to buy, sell, replace, or transfer any specific asset, account, or firm. Past performance does not guarantee future results. All figures shown are illustrative.