Benchmark Portfolio?

I used to follow Canadian Capitalist's Sleepy portfolio, but haven't heard much about it lately.

I've always thought that it's best to create a custom benchmark for yourself. So if 10% of your investments are from the TSX, 50% from the US, 20% international and 20% fixed income you should have a weighted average benchmark of 10% x TSX, 50% S&P 500, 20% MSCI EAFE and 20% DEX Universe.

SimpleCanuck said:

Against what basket of goods do you value your portfolio? The S&P 500? T-Bills? Cheers!

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A personalized benchmark, as Preet suggested, is probably best. But like all investors I'm hoping for absolute positive returns so sometimes a benchmark just won't cut it.

I also like to see my income rising on an annual basis (through new investments, increased dividends from the company or via DRIP).

I am a balanced investor so I use the FPX balanced benchmark. It's easy, the components are all published, there's enough history for comparisons.

http://croftgroup.com/indexes/calculator.asp

I track two benchmarks: one for a $100K initial investment split between various ETFs and another a $1,000 periodic investment every quarter. Both are aggressive portfolios with only 20% to 25% allocated to fixed income and cash. I used them for benchmarking my returns but now my portfolios pretty much mirror the benchmark.

http://www.canadiancapitalist.com/category/investing/sleepy-portfolio/

I'll second Preet that benchmarking is extremely important. Most people might find out that they aren't doing all that well compared to the benchmark.

SimpleCanuck said:

I'm wondering what people include in their benchmark portfolio. I mean the portfolio you watch as the metric against which you judge your total investments.

I already watch a number of key indexes over time (North American, European, China, and S.E. Asia mostly; differentially applicable), but I wonder what the practice and the insight is.

Against what basket of goods do you value your portfolio? The S&P 500? T-Bills?


Cheers!

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As you can see in my sig, over the last 10 years we've been benchmarking the performance of our non-registered account against the S&P500.

Has anyone ever wondered why country-weighted benchmarks are so much more popular than sector-weighted benchmarks? I can understand this works well for Americans since S&P 500 is already diversified, but what about in Canada?

Hypothetically should a diversified individual stock investor (100% in Canada) benchmark his stocks against the TSX even if assuming TSX is 80% resource? Or, should he benchmark against S&P 500 due to the similar sector allocation? Or, half and half?

When someone is considering Research In Motion as an investment, what is he comparing RIM with? Other TSX stocks like Encana, or direct competitors like Apple and Nokia?

FinancialJungle said:

Has anyone ever wondered why country-weighted benchmarks are so much more popular than sector-weighted benchmarks? I can understand this works well for Americans since S&P 500 is already diversified, but what about in Canada?

Hypothetically should a diversified individual stock investor (100% in Canada) benchmark his stocks against the TSX even if assuming TSX is 80% resource? Or, should he benchmark against S&P 500 due to the similar sector allocation? Or, half and half?

When someone is considering Research In Motion as an investment, what is he comparing RIM with? Other TSX stocks like Encana, or direct competitors like Apple and Nokia?

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My perspective is you would put RIM against the TSX since thats what you are attempting to beat. If you're buying individual stocks then you think they will do better then the index as a whole so you should compare it against the index. But I would think its personal preference on how you want to track your performance.

I own several US bank stocks and I would probably track it against both a financial sector ETF and the S&P 500 index.

To be honest, I have no desire to beat the TSX. I’m buying individual stocks for diversification rather for index-beating performance. It’s no secret that the TSX lives and dies by financial and resource, so should I be penalized if I make a conscious decision not to over-expose myself to these sectors?

My Canadian stocks are currently ahead of the TSX by 7.0% trailing 12-month; largely due to poor performance in the TSX’ top sectors. But I wouldn’t lament if the situations were to reverse, because I keep my eggs in different baskets rather than going all-in in a few sectors.

We’re living in an increasing globalized world. My opinion is that S&P 500 is the benchmark to beat for equities. It’s far more diversified than any other indexes around the world. You find American companies conducting businesses aboard. There is also a plethora of ADRs trading on NYSE. Even my ex-employer traded only on NASDAQ.