Benchmarking portfolios can be tricky as it involves judgment and potential bias. Using the right benchmarks is crucial for accurate performance evaluation. Morningstar data shows active bond investing often outperforms passive strategies. Custom benchmarks should be broad and reflective of market performance to provide meaningful insights to clients.

Choosing the best benchmark involves considering various factors such as fees and risk differentials. Vanguard funds are often used as benchmarks due to their longevity and low fees. Understanding benchmark weightings is essential for accurate performance evaluation over time. Advisors should be aware of biases when selecting benchmarks to ensure transparency and objectivity.

Minimizing bias in benchmark selection is crucial for accurate performance evaluation. Advisors should select benchmarks ahead of time, ensure consistency, and seek feedback from respected peers. Using broad benchmarks that match portfolio characteristics can help provide a more accurate performance comparison. Science and art must be combined to effectively select benchmarks that reflect market performance and aid in portfolio evaluation.

Read more at Yahoo Finance: Playing the Benchmarking Game With Allan Roth