A:

"Beating the market" is a difficult phrase to analyze. It can be used to refer to two different situations:

1. An investor, portfolio manager, fund or other investment specialist produces a better return than the market average. The market average can be calculated in many ways, but usually a benchmark - such as the S&P 500 or the Dow Jones Industrial Average index - is a good representation of the market average. If your returns exceed the percentage return of the chosen benchmark, you have beaten the market - congrats! (To learn more, read Benchmark Your Returns With Indexes.)

2. A company's earnings, sales or some other valuation metric is superior to that of other companies in its industry. How do you know when this happens? Well, if a company beats the market by a large amount, the financial news sources are usually pretty good at telling you. However, if you want to find out for yourself, you need to break out your calculator and request some information from the companies you want to measure. Many financial magazines do this sort of thing regularly for you - they'll have a section with a title like "Industry Leaders." We don't suggest you depend on magazines for your investment picks, but these publications may be a good place to start when looking for companies to research.

RELATED FAQS

  1. How does the risk of investing in the aerospace sector compare to the broader market?

    Learn how the risk of investing in the aerospace sector compares to the broader market and how investors use this information ...
  2. How does a pension income drawdown work?

    Understand what a pension income drawdown plan is, and learn the current rules governing pension income drawdown plans in ...
  3. What is the most important section in an investment company's prospectus?

    Learn about the various elements included in an investment company's prospectus and which ones are most important for investors ...
  4. What option strategies can I use to earn additional income when investing in the ...

    Discover how risk-averse investors need to build a retirement portfolio. The major factors are diversification and avoiding ...
RELATED TERMS
  1. Sharpe Ratio

    A ratio developed by Nobel laureate William F. Sharpe to measure ...
  2. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  3. Smart Beta

    Smart beta defines a set of investment strategies that emphasize ...
  4. Discretionary Investment Management

    A form of investment management in which buy and sell decisions ...
  5. Account Minimum

    The minimum balance required to be maintained in an investment ...
  6. Capital Growth

    The increase in value of an asset or investment over time. It ...

You May Also Like

Related Articles
  1. Investing

    Which Dow Jones Stocks are Safe? Which ...

  2. Mutual Funds & ETFs

    Top Commodities ETFs for Your Retirement ...

  3. Savings

    Investing: How to Make Fast Money in ...

  4. Fundamental Analysis

    Young Investors: Should You Care About ...

  5. Stock Analysis

    Why Not All Dow Stocks are Created Equal

Trading Center