Tracking Portfolio Against SP500

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Topic Author
djeayzonne
Posts: 95
Joined: Wed Dec 06, 2017 2:14 pm

Tracking Portfolio Against SP500

Post by djeayzonne »

So, I want to track my total portfolio performance against SP500.

I set up a simple 3-column tab in a google sheet and created a simple chart showing daily change in percentage.

So, like on Sep. 3, I was down 5.68% vs 3.51% for SP500.
I was down a little more than SP500 the next 2 days as well.

Then, today, I am up 3.97% vs 2.01% for SP500.
So, just looking at this chart, it seems like I am already beating SP500 again,
but I don't think this is true because I lost more those 4 days (-5.68%, -1.87%, -3.48% vs -3.51%, -0.81%, -2.78%)

What I want to track is my actual performance against SP500 to see if I am beating it or losing against it.
I think what I have set up is much too simplistic. How can I do what I want to do?
alex_686
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Joined: Mon Feb 09, 2015 2:39 pm

Re: Tracking Portfolio Against SP500

Post by alex_686 »

I have done this professionally.

You can chain index. 1+percent return * 1+percent return. If you are doing this daily 12 digits of precision should work. Monthly, 8 digits. Remember that the S&P does not factor in dividends.

By the way, why are you doing this? Is your portfolio only large cap domestic stocks?

Also, remember to adjust for risk.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
corp_sharecropper
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Re: Tracking Portfolio Against SP500

Post by corp_sharecropper »

Just find a site, like morningstar (among others, many others), that let's you import your portfolio. Then track your total returns, assuming you're reinvesting dividends, versus SPX total returns. Or are you saying you 100% need/want this in your own personal spreadsheet?
burritoLover
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Re: Tracking Portfolio Against SP500

Post by burritoLover »

Why would you want to do this?
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jarjarM
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Re: Tracking Portfolio Against SP500

Post by jarjarM »

A quick check shows that you're underperforming SP500 by ~2%. As Alex mentioned above, you need to do chain index (1+percent return).
- Your return in last 4 days is -7.1%
- SP500 return in last 4 days is -5.1%.
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willthrill81
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Re: Tracking Portfolio Against SP500

Post by willthrill81 »

You will almost certainly want to track both your time-weighted returns against the S&P 500 as well as your money-weighted returns (aka internal rate of return). Conflating these will lead to highly erroneous conclusions.

For instance, if the S&P 500 stayed at $100 for almost ten years and jumped to $200 on the very last day, the time-weighted return over the ten year period would be 7.2%. But if you were periodically investing the same dollar amount at the beginning of each year, your money-weighted return would be 12.3% annualized. By contrast, if the S&P 500 jumped from $100 to $200 in year 1 and then remained flat, the time-weighted return would still be 7.2%, but your money-weighted return would be 1.7%.

Failing to understand this distinction lead to the infamous DALBAR study's completely erroneous conclusion that investors were greatly lagging the performance of the market, as Harry Sit discussed here. In the second situation above, it would seem like investors must have been doing something badly wrong if they were lagging the market so much, but that's false.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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arcticpineapplecorp.
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Re: Tracking Portfolio Against SP500

Post by arcticpineapplecorp. »

djeayzonne wrote: Wed Sep 09, 2020 8:01 pm So, I want to track my total portfolio performance against SP500.

I set up a simple 3-column tab in a google sheet and created a simple chart showing daily change in percentage.

So, like on Sep. 3, I was down 5.68% vs 3.51% for SP500.
I was down a little more than SP500 the next 2 days as well.

Then, today, I am up 3.97% vs 2.01% for SP500.
So, just looking at this chart, it seems like I am already beating SP500 again,
but I don't think this is true because I lost more those 4 days (-5.68%, -1.87%, -3.48% vs -3.51%, -0.81%, -2.78%)

What I want to track is my actual performance against SP500 to see if I am beating it or losing against it.
I think what I have set up is much too simplistic. How can I do what I want to do?
I'm not sure how (or why) you'd do this. Why not look over a longer time period, like 1, 3 and 5 year data (at least). For instance, SPIVA does this looking at how active managers have done against the S&P500:

https://www.spindices.com/spiva/#/reports

As you can see the longer the timeframe, the less likely it is to outperform the S&P500 (but even over 1 year only 30% of active managers beat the S&P500).

So why bother with daily or weekly returns? If you're investing for a lifetime, shouldn't you be concerned about whether you beat the S&P500 over your lifetime? What do you think are the odds of that?

Finally, you must be careful in how you describe your investing behavior. Sometimes you say "I lost.." and other times you say "I am beating". The first is correct and the second is incorrect. You are not beating, you may have beat. Different things. You only know what you did in the past, you don't know the future. To say "I am losing" or "I am beating" is to presume what will happen rather than what has happened.

Finally, if you do beat the S&P500 were you compensated ENOUGH for the additional risk you likely took? I.E., what is your RISK ADJUSTED return compared to the S&P500? If you don't know how to compute that, I'd probably not take the additional risk, because it's highly probable you're not being compensated enough for the extra risk you're taking. Owning the market (not S&P500 but total market) means you eliminate all risks like sector, size, style, sector, manager...and are only left market risk. That's the risk you get compensated for taking. But you don't generally get compensated for the other risks you're likely taking.

Don't forget to factor in the costs associated with the time you're spending figuring this all out. Time is money after all. You're going to spend some time, so that's going to reduce your overall returns. Isn't it better to just get the return of the market and spend your time doing something else?
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
Topic Author
djeayzonne
Posts: 95
Joined: Wed Dec 06, 2017 2:14 pm

Re: Tracking Portfolio Against SP500

Post by djeayzonne »

Thanks for the mention of the chain index!

I tried to Google more about this, but I wasn't able to find relevant hits.

Does this look like it is set up right?

Formula is =(1+c3)*(1+c4), etc. and (1+d3)*(1+d4), etc.

Image
Topic Author
djeayzonne
Posts: 95
Joined: Wed Dec 06, 2017 2:14 pm

Re: Tracking Portfolio Against SP500

Post by djeayzonne »

corp_sharecropper wrote: Wed Sep 09, 2020 8:24 pm Just find a site, like morningstar (among others, many others), that let's you import your portfolio. Then track your total returns, assuming you're reinvesting dividends, versus SPX total returns. Or are you saying you 100% need/want this in your own personal spreadsheet?
I have been and still use Personal Capital.
I noticed that the You Index number under Market Movers on the Overview page is ALWAYS wrong and ALWAYS too low vs actual results.

That is what got me started thinking to just track things myself.
Topic Author
djeayzonne
Posts: 95
Joined: Wed Dec 06, 2017 2:14 pm

Re: Tracking Portfolio Against SP500

Post by djeayzonne »

I did also spend some time a few days ago to set up the spreadsheet found on the Calculating personal returns wiki page.

The reason I want to track against the SP500 is because I am doing a few different things.
Also, I do intend to track longer periods of time as I keep investing/trading and have the data.
Most of these non-standard strategies were just started recently, so I simply don't have much data yet.

1. I started saving in 2016 just following the standard 2-fund portfolio (100% stocks: 70% US, 30% Int'l) via Fidelity funds.

2. I started the Hedgefundie Adventure this time last year using my Roth IRA. This represents 12% of total portfolio.

3. At the beginning of this year in wife's Roth and Trad. IRA, I replaced all Fidelity funds with PSLDX.

4. In taxable, I am also building up a decent amount of NTSX starting late last year.

5. I also decided to follow the LifeCycle Investing strategy early this year to be 2:1 leveraged until my desired stock allocation is met.
I include the UPRO portion of the HFEA as part of getting to 2:1 leverage. The rest is from a combination of SPY LEAPs and ES futures.

6. I just started to sell naked /ES puts per ERN's (Early Retirement Now) strategy about 6 weeks ago.

7. I decided about 3 weeks ago I wanted to dip my toe in active trading with a second, small taxable account to sell naked options on solid individual stocks. (less than 5% of portfolio)

I simply want to track my actual performance against SP500 mostly out of curiosity but also to see if this is worth it.
By worth it, I mean I expect to beat SP500 on green days but also expect to lose against SP500 on red days.
In the end, am I actually ahead?
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Brianmcg321
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Re: Tracking Portfolio Against SP500

Post by Brianmcg321 »

Wow. Is there a system you’re not trying? :oops:
Rules to investing: | 1. Don't lose money. | 2. Don't forget rule number 1.
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