You often hear analysts or advisers referring to benchmarks, particularly in the world of investments, where this refers to an index or some other rating of asset performance. The meaning of the word ‘benchmark’ goes further than that and can be defined as a standard by which something can be measured against similar things, as a basis for performance evaluation. In terms of personal investments, advice and assistance is often sought from expert financial advisers who examine your total financial position and compare it to an investment industry benchmark and advise you accordingly.

Personal Needs and a Benchmark

Far too often, we tend to look at the economic big picture and neglect our personal position and needs. It is very important in planning your personal investment plan to concern yourself more with your personal economy rather than with the economy. The result will be that instead of merely being satisfied with investments that meet the benchmark, you will start to look for investments that suit your personal needs which might well be bigger than the benchmark. Another factor is that from time to time, a bad investment choice is made and with your investments bigger than a benchmark, you are able to compensate for the setback.

Benchmark

Life’s Journey and a Benchmark

We all set objectives for ourselves as we set out on the journey through life and many of these goals are based on a benchmark. Examples of this are obtaining a skill or qualification by the age of 24, repayment of a student loan by the age of 32, purchasing your own property by a certain age and many others that you could think of. Aiming at qualifying or obtaining a skill by 22 and repaying of your student loan by 28 would be examples of aiming bigger or higher than a benchmark, and the same rule should apply to everything you attempt in life.

Investment Planning and a Benchmark

You will find any amount of investment literature and expert advice about how to plan for your future to ensure an easy retirement. Most of this will use your current lifestyle as a benchmark of the lifestyle you should be aiming at for your retirement years. This advice very often overlooks some very important aspects of your current lifestyle compared to a retirement lifestyle. The result is that the benchmark set for your retirement income could be lower than the reality. An example would be that during your working life, vacations are limited to 2 or 3 weeks annually as a result of job commitments and employer rules. Once you retire, the time available for vacations increases to a marked degree, while the benchmark income planned allowed for the same vacation time as when you were working. During retirement, you might want to play golf three times a week rather than once a week as you used to, now that you have more time available. There are probably many more activities that you would enjoy once you are retired and have time at your disposal. The reality however is that all these things cost money beyond the benchmark your financial planning took into account.

Why should you be satisfied with being average and just meeting the benchmark? Ambition and a desire for betterment should be the guiding light and in order to achieve this, your targets must be bigger than the benchmark. This applies to most things in life, but particularly to your investments, because going bigger than a benchmark will ensure retirement comfort and the ability to have the financial freedom to enjoy your retirement.

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