Security Market Indicator Series - SMIS

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DEFINITION of 'Security Market Indicator Series - SMIS'

An index that uses the performance of a sampling of securities to represent the performance of a market segment or overall market. The security market indicator series assumes that the performance of a statistically valid set of securities will reflect the performance of a larger set of securities. Its purpose is to give investors a general idea of the way a larger segment of the market performs in aggregate.

BREAKING DOWN 'Security Market Indicator Series - SMIS'

Security market indicator series are often used in benchmarking. For example, an analyst may compare a security considered high growth to a sampling of similarly labeled securities to determine if the security performs better or worse than its peers.

SMIS may also be used in the creation of index funds, which are designed to follow the performance of a much larger market. Because the SMIS is an approximation for the performance of a larger segment, an index that follows the S&P 500, for example, will not have the same return as the overall S&P 500 index.

While SMIS can be used to determine the performance of a larger market segment, it can also be used to compare the performance of a money manager to the overall market performance. Because money managers charge fees, it is helpful for investors to determine whether those fees are warranted by performance. Ideally the money manager will outperform the market once fees are taken into account.

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