How do you keep yourself honest about your returns?

[McCharley]

I have a portfolio of stocks and would like to compare my returns to the SP500.

I can XIRR my cash flows (I put money in and took money out over the year), but how do I add SP500 comparison data?

I tried a mirror portfolio where all cash flows were in and out of GSPC, but I think this misses dividends. (?)

I am trying to keep myself honest about single stock investing; this is not a large part of my portfolio. I am a Bolgehead, after all!

Tax loss harvesting makes my portfolio look like a champ right about now! But I know it ain't true.

I know many of you invest in individual stocks as well -- how do you keep yourselves honest about your performance?

[bottlecap]

I don't. I don't keep track of my coin flips, either. No need to be honest, I just tell people I'm really good at winning coin flips!

JT

[livesoft]

Petrocelli has a nice method as described in his thread: viewtopic.php?f=1&t=103835

[Sidney]

I don't calculate historical returns on the portfolio. I can see the returns of the individual funds -- for what that is worth. I can't change the past so I try not to dwell on it.

[Rodc]

Just use something like Vanguard's S&P 500 fund, or maybe a little better Vanguard's TSM as your benchmark. That automatically includes dividends.

[Boglenaut]

Tax loss harvesting makes my portfolio look like a champ right about now! But I know it ain't true.

You make a point I made in several other threads. I purposefully do not calculate personal rate of returns. For a Boglehead using index funds and sticking with an allocation plan, you should be understanding how the indices you invest in behave, not the quirks of when you happened to do a TLH or invested a windfall.

Personal rate of returns are very misleading. The market doesn't care that you had an unexpected $20K bonus that happened to hit Jan. 8 or you did TLH on Feb. 7.

[dkturner]

Tax loss harvesting makes my portfolio look like a champ right about now! But I know it ain't true.

You make a point I made in several other threads. I purposefully do not calculate personal rate of returns. For a Boglehead using index funds and sticking with an allocation plan, you should be understanding how the indices you invest in behave, not the quirks of when you happened to do a TLH or invested a windfall.

Personal rate of returns are very misleading. The market doesn't care that you had an unexpected $20K bonus that happened to hit Jan. 8 or you did TLH on Feb. 7.

What about Bogleheads, like Jack Bogle and I, who also own actively managed funds? Where are Jack and I going to find a reasonably priced tax-exempt bond index fund to hold the fixed income portion of our taxable accounts?

Thanks for the suggestion, but I think I'll pass on the ignorance thing.

[bpp]

Every time I buy an individual stock, I pretend I bought an equal amount of the index fund I use as my benchmark. Then I just compare total values of my basket of stocks and the pretend index fund holdings. I ignore dividends, so if my dividend yield is significantly different from that of the index, my tracking error measurement would be off by that amount. However, that just seems too complicated to worry about. All I really want to know is that my stock basket is not hideously underperforming the equivalent index fund investment. So far so good, tracking error seems to be small enough that I don't think I'm fatally underdiversified, so good enough.

[Sam I Am]

The last time I bought individual stocks for my fun portfolio, I also bought some shares of S&P500 in the form of the ETF SPY.

I bought the shares of SPY for the same reason you are wondering about, to keep myself honest.

Of my five individual stocks, two lagged the SPY return, two exceeded the SPY return by several percentage points, and one stock crushed SPY's return.

I am very satisfied with my fun portfolio's returns, and I have started taking my gains.

Sam I Am

[ihckennedy]

See "Keeping Score" at http://simplesmartinvesting.com/?p=212

[Doc]

I can XIRR my cash flows (I put money in and took money out over the year), but how do I add SP500 comparison data?

Go to Yahoo Finance and display the historic prices for the fund you would like to use as a benchmark. Then read the fine print.

* Close price adjusted for dividends and splits.

You can use Excel or even the simple calculator that comes with Windows to get an annualized return for any time period in the data base.

[Default User BR]

I agree with some of the others. I can absolutely honestly say, "I don't know what my returns are." I do know what my asset allocation is and how it compares to target, and how much the total value is. That is what is important to me. Rate of return is not.


Brian

[jeffyscott]

You can the last 5 year's quarterly and monthly total returns for the S&P 500 (or any fund) from morningstar.

http://performance.morningstar.com/fund ... ture=en-US

[McCharley]

I thought I'd update this with my results.

I XIRR'ed everything in Excel, comparing my deposits and withdrawals to a mirror with just purchases and sells of SPY.

If I go back 5 years it turns out that I would have been better off with just the SPY.

I'm beating SPY for the year, tho'!

Did you guys need more proof that it is hard to beat index funds in the long haul?

[Boglenaut]

Thanks for the suggestion, but I think I'll pass on the ignorance thing.

If you read my post, you will clearly see that I am not advocating ignorance. As I clearly state, for index investors, the key is to have a good understanding of how the indexes behave. The timing of individual contributions you made in the past are irrelevant to how markets will behave going forward.

Please read posts fully before responding and not mis-characterize other peoples' comments with derogatory statements.

[sscritic]

If I were going to make drastic changes to my portfolio based on how it performed relative to a benchmark, I would want to know how my portfolio performed relative to a benchmark, but since I am not going to make drastic changes to my portfolio based on how it performed relative to a benchmark, I don't need to know how my portfolio performed relative to a benchmark.

I try to be purposeful about the things I do; since there is no purpose in comparing how my portfolio performs relative to a benchmark, I don't compare how my portfolio performs relative to a benchmark.

[dkturner]

Thanks for the suggestion, but I think I'll pass on the ignorance thing.

If you read my post, you will clearly see that I am not advocating ignorance. As I clearly state, for index investors, the key is to have a good understanding of how the indexes behave. The timing of individual contributions you made in the past are irrelevant to how markets will behave going forward.

Please read posts fully before responding and not mis-characterize other peoples' comments with derogatory statements.

I was talking about Bogleheads, like Jack Bogle and me, who hold some actively managed funds. Some of us have also been known to move our money around, based on perceived valuation opportunities. If I didn't check on the return of my portfolio at least once per year I never would have known that I have managed to best a benchmark of Vanguard index funds which mirror my portfolio by 170 basis points per year for the last 18 years.