BMO InvestorLine: Tracking Benchmark Index and Economic Indicators
Can Yield Smarter Investing Decisions
TORONTO, ONTARIO -- (Marketwire) -- 11/26/12 -- BMO InvestorLine
reminds Canadian investors that one of the keys to successful
investing is awareness of how their investments are performing and
watching out for warning signs.
An effective way to measure an investment's performance is by
comparing it to a benchmark index such as the S&P/TSX Composite
Index. This will show whether the investment is outperforming,
underperforming or matching its benchmark. This is best used for
investments that are indexed themselves - such as Exchange Trades
Funds (ETF) and mutual funds - as the comparison is more similar.
Most ETFs track an index - such as a stock index or bond index -
while mutual funds are a collection of investments typically focused
on a particular sector or type of investment.
Investors can also do their research by watching economic indicators
- such as GDP and the unemployment rate - that point to what lies
ahead for markets and the economy. This can help investors decide
their next steps in managing their portfolio.
"Compare your investment's returns with those of its benchmark over
one-, three-, five-, and ten-year periods, if possible," said Viki
Lazaris, President & CEO, BMO InvestorLine. "It also helps to
understand how leading economic indicators can affect your
investments. Doing so will allow you to invest more effectively and
adjust your financial strategy as necessary."
Some of the most commonly used benchmarks to measure an investment's
market performance include:
-- Dow Jones Industrial Average: Tracks the performance of 30 of the
largest U.S. corporations during a standard trading session in the stock
-- Standard & Poor's 500 Index (S&P 500): Tracks the performance of the top
500 publicly-traded financial, industrial, transportation, and utility
company stocks in the U.S.; and is considered an important benchmark for
-- NASDAQ Composite Index: Measures more than 3,000 companies listed on the
NASDAQ stock market.
-- S&P/TSX Composite Index: Tracks the stock prices of the largest
companies listed on the Toronto Stock Exchange (TSX) by market
-- NYSE Composite Index: Follows stocks listed on the New York Stock
Exchange and in four subgroup indexes: industrial, transportation,
utility, and finance.
-- Morgan Stanley Capital International EAFE: Tracks non-U.S. companies in
Europe, Australia, Asia, and the Far East.
BMO InvestorLine offers the following tips to help investors use
economic indicators to invest more wisely:
-- Watch the Numbers: The Consumer Price Index (CPI), the unemployment rate
and Gross Domestic Product (GDP) are some common economic indicators
that can help Canadians judge how to invest.
-- Heed the Signs: If the leading economic indicators suggest that the
economy is slowing, investors can often become wary and decide to sell
equities. The opposite is often the case when indicators show positive
economic growth, enticing investors to buy stocks because they
anticipate that consumers will spend money and corporate profits will
-- Expect the Unexpected: Investors should keep in mind that, while the
economy and the markets work in general patterns, the effect of an
economic indicator is influenced by the current financial context. For
instance, a low unemployment report is generally considered good news
for the market; however investors may fear that a tight job market could
lead to higher salaries, higher prices and inflation. This could in turn
lead the government to raise interest rates, lowering spending and
leading to lower stock and bond prices.
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About BMO InvestorLine
BMO InvestorLine is an online investing service that provides clients
with two ways to invest online. Clients can choose from BMO
InvestorLine's top ranked Self-Directed service that provides tools
to help investors make independent decisions on how to invest. BMO
InvestorLine's other service, adviceDirect(TM) provides investors
with online advice and investment recommendations for their
portfolios. Clients have access to trading, quotes and account
information 24 hours a day through a website or Automated Telephone
Trading. BMO InvestorLine also provides users with third party
research, along with leading edge tools that are informative and easy
to use. As an all-in-one investment source, it is a constantly
evolving, cost-efficient platform that is fully compatible with
BMO InvestorLine Inc. and BMO Ligne D'action Inc. provide this
commentary to clients for informational purposes only. The
information contained herein is based on sources that we believe to
be reliable, but is not guaranteed by us, may be incomplete or may
change without notice. The comments included in this document are
general in nature, and professional advice regarding an individual's
particular position should be obtained.
An adviceDirect account is a non-discretionary fee based account
which offers investment recommendations. adviceDirect does not
provide portfolio management by a portfolio manager. The client makes
their own investment decisions and manages their own investment
portfolio. adviceDirect does not offer discretionary, managed
BMO InvestorLine Inc. is a member of BMO Financial Group.
(R) Registered trade-mark of Bank of Montreal, used under licence.
BMO InvestorLine Inc. is a wholly owned subsidiary of Bank of
Montreal Holdings Inc. Member - Canadian Investor Protection Fund and
Rachael McKay, Toronto
Valerie Doucet, Montreal
Laurie Grant, Vancouver
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