With the growing number of investment tools, we have many options when choosing a benchmark. Yet the most appropriate choice usually isn't obvious for two reasons: It's rare that portfolios match one index substantially and they also change over time.

A large part of my work is creating custom benchmarks for foundations and trusts. By the time I'm done, I almost always find that both my clients and their money managers are surprised at the results. A key lesson is that the ubiquitous comparisons to the S&P 500 are often a disservice to your clients — if not dishonest. It's important to understand that, akin to other areas of investing, the choice of benchmarks is influenced by emotion and bias.

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