Understanding Market Indexes and Benchmarks

Review the introduction to stock indexes in LEI Lesson 7. Then use slides 32–35 from Building Wealth Lesson 6 to introduce index funds and compare indexes by geography, sector, and company size. Emphasize that indexes represent different groups of securities and therefore may produce different performance results.
Supplement this instruction with an explanation of how a market index can serve as a benchmark for evaluating investment performance, the distinction between market-cap-weighted and price-weighted indexes, and how investors select an appropriate benchmark for a portfolio.