When I watch golf and look at the results of the top players, I can immediately know exactly how they compare both to the standard (called par) and to each other.
Why doesn't investing have such a standard? Or, if there is one, what is it and why isn't it more well known?
If there isn't one, why not use a fictitious investment that always returns 10% per year with no fees? Here is an example of how this would work:
Consider a couple of potential investments (with one initial outlay of money in 2001) over the 20 year period from 2001-2021 and compare them to the standard, which I'll label S20 for "standard investment for 20 years." I'll show the compound annual growth rate and a rating which represents how the investment does compared to the standard (a multiplicative factor, e.g., if it's 1.20 the investment made 20% more than the standard).
From the rating column, we know that the S&P500 Index investment results in an amount that is 62% of what the standard investment would produce and the Dow-Jones value is only 54% of the standard.
The use of a standard can provide a simple approach to compare investments that have different fees and returns that can be confusing to investors. The advantage of this standard is that every serious investor has an intuitive idea of a 10% annual return (with no fees) and we can easily gauge the ratings against it. We know that if the rating is > 1 the investment is better than the standard and that if it is < 1 we know it is worse (and in each case we know how much better or worse). We need a standard!