"What did the market do today?'' The answer to that question could very well be, "It depends upon which index you look at.'' If your interest is local stocks, then the issue is fairly simple. The Bermuda Stock Exchange Index is all that you'll need to check whether it's been a winning or losing day on the local bourse -- bearing in mind that the the two major banks have a heavy influence on it.

But if you want to track the markets in, say, the US, then things become much more complicated.

Of course, we're all familiar with the Dow Jones Industrial Average, affectionately referred to as just "the Dow''. When the Dow is up, the market is rising. When the Dow is down, the market is falling, right? Well, perhaps...but not necessarily.

Most market watchers will know that there are many averages, all of which set out to represent the market, either in whole or in part. There are indexes for different exchanges and industry sectors, and there are even different sized versions of the same index. In fact, counting the different offerings available in the US alone would take us beyond sixty.

So which do we use to gauge the performance of the market as a whole and compare the performance of our own portfolios? In the view of many professionals, not the Dow. Many believe that the Dow, an index of just 30 industrial stocks, is simply too narrow to represent the more than 6,700 issues that make up today's market.

And the companies in it, they feel, no longer reflect the true nature of the US economy. The Dow's "Big Uglies'' are predominantly manufacturing companies, yet 80 percent of US workers these days are employed in service industries. What's more, the average is weighted in favour of companies with the highest share price, so a sizeable change in the price of, say, Caterpillar or Alcoa can skew the whole index.

Meanwhile, the Nasdaq Composite Index, which tracks the performance of smaller companies on the over the counter market, runs into criticism that it, too, is unduly influenced by certain stocks. Certainly, much of the Nasdaq's fate is in the hands of giants like Microsoft, Intel and MCI. A good day for these almost invariably means a good day for the index, even if the rest of the market has been flat or weak. So, If not the Dow or the Nasdaq, which index did we choose? Those with broad based portfolios would probably be better served by either the S&P 500 or the misnamed Wilshire 5000 (which actually consists of 6723 stocks!). Of the two, the S&P 500 is more favoured by the professionals. It is constructed "bottom up'' by industry group, and it contains a more balanced mix of large and small companies. And of course, because it consists of 500 stocks, it is quite representative of the market in general. It is particularly helpful to measure the performance of a diversified portfolio of stocks or mutual funds.

For followers of small-capitalisation stocks, the Russell 2000 will probably provide a closer measure of performance than the Nasdaq Composite. The Russell, although less often quoted than its more famous cousin, is made up primarily of small companies and has more even weightings. For these reasons, like the S&P 500, it will tend to track more closely the performance of a small-cap stock portfolio.

Whatever benchmark we choose, then, we need to keep in mind a golden rule of comparison, i.e. always compare apples with apples and oranges with oranges.

Huw Williams is a stockbroker at Gulfstream Securities.