Bogey (Investment Performance) - Explained
What is a Bogey?
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Table of ContentsWhat is a Bogey?What are Benchmark Comparisons?Bogey Benchmark AnalysisAcademic Research on Bogey
What is a Bogey?
Bogey is a slang term used to describe a benchmark used to evaluate an investments performance. A bogey can be used in mutual funds as an index benchmark through which the performance of the fund can be evaluated. Oftentimes, fund or portfolio managers strive to match the performance of the bogey. In a particular market, a bogey can be used to compare the results of two investments mutual funds and portfolios. This index performance also gives insight into the performance of a fund.
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What are Benchmark Comparisons?
Bogey also refers to the benchmark set by a fund company to evaluate the performance of its funds. This benchmark is set aside to help them measure the performance of their funds compared to other investments in the market. Aside from evaluating the performance of a fund, investment or portfolio, a bogey also examines other characteristics such as the risks of the funds. The S&P 500 is a popular example of a bogey used in the market to check how well an investment is performing. There are different reasons for which an investor or a fund company will set a target benchmark (bogey) for its funds, the major reason is to give insight into how an investment is performing as against other investments in the industry.
Bogey Benchmark Analysis
A bogey benchmark is often in alignment with the objectives or goals of a mutual fund company, along with its investment strategy. Usually, a bogey has a similar performance as a fund. Some bogeys are set so with the goal of a fund replicating the performance and characteristics of an index, while some bogey benchmarks are used as a technique to outperform the market benchmark. In some cases, however, mutual fund companies and investors set bogeys just to make a comparison between their investment and the broader market. Below are the major terms associated with a bogey;
- A benchmark: This refers to the standard used in measuring the performance of an investment, fund or portfolio.
- Index: This is a measure of the performance of a group of securities that are expected to replicate the market benchmark such as the S&P 500.
- Alpha: This measures the excess return of an investment as compared to the return of the benchmark index.
- Security Market Indicator Series (SMIS): This is an indicator series where the performance of a group (subset) of securities is a representation of the general performance of a broad market.
- Aggressive Growth Fund: This is a mutual fund that invests in aggressive growth stocks, seeking excess capital gains.