Thank goodness for benchmarks. Without them, we'd have little idea of how we're doing. There are benchmarks for myriad aspects of life. Children aged around four, for example, can generally follow simple classroom rules, such as going to the book corner after snack time. At least, that's the general concensus of experts.
Shifting gears toward investing, Intel (NASDAQ:INTC) has had an average P/E of 35 or less over most of the last decade -- except 2001 and 2002, when it topped 150 and 50, respectively. Information such as that can serve as a useful benchmark, suggesting to us that if Intel has a P/E of 60 now (which it doesn't), it might have gotten ahead of itself and might not be quite a bargain.
Several of our investing newsletters use benchmarks, too, comparing their performance, for example, with the S&P 500 index fund, which is a proxy for the overall market. (Grab a free sample issue of one or more newsletters and see which stocks and funds we're recommending, and why.)
Consumer Reports' Money Advisor recently offered a bunch of useful financial benchmarks. See whether any of them can help you make more sense of your finances:
- With credit cards, look for an interest rate of 10% per year on new purchases and 0% for balance transfers. Those with good credit scores (learn more about them) can get even better terms, while those with poor credit may have to pay more.
- With bank accounts, you should be able to pay nothing monthly for a checking account. Compare your bank (or a bank where you're considering opening an account) with others by examining all the fees they charge. (More on Foolish banking.)
- With short-term savings, look for interest rates of at least 2% for CDs and money market funds and at least 1.5% for money-market accounts. Our Savings Center offers you more tips and some special interest rates that exceed these benchmarks considerably.
- With brokerages, you can pay nothing for mutual fund purchases and sales and $10 or less for stock trades. Some brokerages now offer commission-free fund trading, and many brokerages sport very low commissions. Note, though, that it can be better sometimes to pay a slightly higher commission (if you trade infrequently, for example) in exchange for other favorable features. Learn more and perhaps find yourself a better brokerage in our Broker Center.
- With mutual funds, look at fund category averages. For many stock funds, a suitable benchmark is the S&P 500. If your fund isn't beating it over the long haul, you'd be better off in an S&P 500 index fund. Learn more in our Mutual Fund Center.
Do you have any benchmarks that you use in your financial life? Share them on our discussion board! Or just pop in to see what others are saying.
Longtime Fool contributor Selena Maranjian does not own shares of any companies mentioned in this article.
