When meeting with

clients, we usually talk

about the“ market” and

how it impacts the

investment returns of client

portfolios. Many times,

these conversations are

difficult because people

have different perceptions

as to what defines the

market. I thought it might

be a good idea to illustrate

a few ways we see people

interpret it.

DOW JONES INDUSTRIAL AVERAGE( DJIA)

This is a long standing index of 30 prominent companies listed on various stock exchanges in the US. This benchmark is maintained by S & P Dow Jones Indices. Its components are determined by a committee and are influenced by share price.

S & P 500

A stock market index meant to capture the largest 500 companies in the US on various exchanges. It is also maintained by S & P Dow Jones Indices, but the components are determined by the market capitalization of stocks listed on US exchanges. The companies listed in the DJIA are also listed in the S & P 500.

RUSSELL 1000

This index, like the S & P 500, tracks the largest companies on US exchanges. But this example, maintained by FTSE Russell, uses approximately 1,000 companies instead of 500. The components of the S & P 500 are included in the Russell 1000 and this index is also determined by market capitalization.

RUSSELL 3000

Also maintained by FTSE Russell, this index represents the entire US stock market. It is comprised of the Russell 1000 and Russell 2000( a separate index of small US stocks). As expected, this index includes approximately 3,000 stocks.

MSCI ALL COUNTRY WORLD INDEX

This index is maintained by Morgan Stanley Capital International and is designed to be a global index that represents companies included in the US and international stock markets. Most of the companies in the Russell 3000 are included in the MSCI ACWI.

Why is all of this relevant?

First, you can see that the most commonly used benchmarks( DJIA and S & P 500) are the most narrow of all of those listed above. An investor trying to create a portfolio that matches one of these benchmarks would forgo the diversification benefits of international stocks. While that might have been preferable in 2024 with the S & P 500 providing a 25 % return as compared to 3.8 % for international stocks, the opposite has been true thus far in 2025 with international stocks outperforming US Large Cap stocks by approximately 14 %. Will this trend continue to hold true? I really don’ t know, but for my portfolio, I choose to diversify across multiple asset classes to eliminate unnecessary risks. This means that every year, I have some regret over one or more of the holdings in my portfolio, but it also means that I am guaranteed to have this year’ s winners as well.

Can you use some help making sense of the“ market” and how you can best assemble a portfolio to help you meet your goals? Call one of our advisors at Jackson Thornton Wealth Management and let us show you the way.

Shaw Pritchett is a

Financial Advisor and

President of Jackson

Thornton Wealth

Management in

Montgomery.

SHAW PRITCHETT

334.240.3679

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