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Jan 11 2012

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Indices and Benchmarks

Indices and Benchmarks

An index is a measure of the changes in a group of stocks or bonds representing a portion of the overall market. It can be used to give an investor a point of reference or benchmark as to how a particular market is performing.

If a Canadian investor holds a diversified portfolio, it will typically be allocated between cash, bonds and equities depending upon their risk profile and goals.If you hold a mutual fund or Exchange Traded Fund (ETF), it will list what index it uses as as its benchmark.Some common indice sare as follows.

1. T-Bills are a proxy for cash.  The 3-month T-Bill rate is used as the proxy for cash returns.

2. The DEX Universe Bond is a proxy for the Canadian bond market. Below is a graph of the DEX Universe Bond Index ETF which tracks it. Ticker symbol XBB-TSX

3. S&P/TSX Composite Index is a proxy for the Canadian large cap market listed on the Toronto Stock Exchange (TSX) . The ETF for S&P/TSX 60 from iShares is XIU-TSX

4. The S&P500 is an index of the stock (equity) prices of the  500 largest-cap common stocks actively traded in the United States. The ticker symbol for the S&P500 ETF is SPY

5. MSCI EAFE (pronounced “eef’ ah”) is a stock market index that is designed to measure the equity market performance of developed markets outside of the U.S. & Canada (EAFE stands for Europe, Australasia and the Far East. Below is a graph of the EAFE ETF. Ticker symbol EFA.

Disclaimer:

Investors should educate themselves regarding securities, taxation or exchange control legislation, which may affect them personally.  This email is for general information only and is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice.  Please consult an appropriate professional regarding your particular circumstance.This email does not constitute an offer or solicitation in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it is unlawful to make such offer or solicitation.References to third party goods or services should not be regarded as an endorsement of these goods or services.This is intended for Canadian residents only and the information contained herein is subject to change without notice.  The owner and publisher of this are not liable for any inaccuracies in the information provided.

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