When you break down the one, three and five-year returns of the 53 most established world markets, the results are appalling:

Again, I ask: How much money are you really making if your portfolio “beats” the market?

Take the S&P…the world’s benchmark index. Beating the S&P has become like a golfing handicap, a number that gets bandied about (and maybe embellished a point or two) to impress any financial “mind” polite enough to listen.

The reason is simple… For most, investing has become a game…a competition…a proverbial fight to the finish that separates the winners from the losers.

The goal is simple…beat the S&P.

But why does the S&P serve as the lone benchmark?

What are these guys winning at our expense?

When annualized returns are stacked up against one another, beating the S&P looks about as impressive as the No. 1 seeded North Carolina Tar Heels blowing out the No. 16 seeded Eastern Kentucky Colonels in the opening round of the NCAA tournament.

When an emerging markets manager pounds the fundraising pavement in cities like New York, Chicago and San Francisco, why must he validate his investing success relative to one particular market?

And why do we applaud an achievement that has zero correlation to the underlying investment in question?  If Taipan Capital Management’s 20% return stems from six small-cap Thai stocks, why should we care if these returns beat the American index?

That’s a mistake.

You see, over the past couple of years, more and more Americans have been shifting a larger percentage of their portfolios into foreign stocks. But they still judge their returns relative to what they would have earned here on the NYSE.

And the ones brave enough to open the Financial Times and scan the world equity markets section rarely shift their eyes much further than the G-7.

We need to take a closer look… What other infamous markets remain absent from these lists?

China appears only once.

India and Japan never even crack the top 10.

And what about Hong Kong, Germany or the U.K.?

There nowhere to be seen either.

Instead, we find countries like Egypt, Pakistan and Colombia boasting annual returns well over 50%!

For better or for worse, the markets are global today.

If a private investor in Belgium…or a money manager in Germany has made 80% investing on the Cairo exchange, then that’s the standard that Wall Street should be measuring itself against, not the 9.82% five-year return of U.S. exchanges.

It’s time for a different benchmark of success, whether we like it or not…

That’s why we’re launching a new research service that provides a more global view on investing and on the financial markets.

By just focusing on the U.S. and U.S. exchanges, we’re limiting ourselves to less than 50% of the investing opportunities in the world.

Meanwhile, our friends in Germany and Belgium are getting ahead, at our expense.

This service will grant you access to the best performing stock markets in the world. And to keep things simple, we’ll stick to securities that are traded right here at home.

So if you’re content riding the 52nd best market over the past five years, this service may not be for you. But those looking for an edge… Those that want their money to work for them, global markets are the place to be, bar none.

Until Next Time,
Christopher Hancock
March 23, 2007

P.S.: Get ready for the worst property-led recession of the last 76 years. Nobody’s money is safe. The “Second Wave” housing tsunami of 2007-2011 is about to hit, and smart investors are already battening down the hatches.

Benchmarks for Global Markets was originally featured in the Penny Sleuth.