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Clear filtersChoosing a Benchmark
A return means nothing on its own. What it is compared against determines whether it was good, and the comparison is frequently chosen to flatter.
Tracking Error
How far a portfolio's returns deviate from its benchmark, measured as a standard deviation. It quantifies how different a portfolio is, not how good.
Sharpe, Sortino and Risk-Adjusted Return
Return per unit of risk, where risk means the variability of returns. The measures are useful, widely quoted, and rest on assumptions that returns do not satisfy.
Home Bias
Investors everywhere hold far more of their own country's market than its share of the world would suggest. The pattern is universal, well documented, and only partly rational.
Concentration and Diversification
Diversification lowers the variability of an outcome and lowers the extremes in both directions. Which is preferable is a question about objectives rather than about markets.