![]() ![]() Does that seem odd? I hope not because all that is in your power is what you can control and what you control is how you invest your money. $11,012 - XIC - iShares Core S&P/TSX Capped Composite Index ETFĪs a side note, the top 2 indexes are pretty much telling you what investing in the Canadian stock market is about.īasically, the answer to your what is a good benchmark is your alternative investing strategy. $12,902 - XEI - iShares S&P/TSX Composite High Dividend Index ETF $13,242 - XDV - iShares Canadian Select Dividend Index ETF $13,643 - CDZ - iShares S&P/TSX Canadian Dividend Aristocrats Index ETF $14,935 - XIU - iShares S&P/TSX 60 Index ETF $15,489 - FIE - iShares Canadian Financial Monthly Income ETF The growth of $10,000 after 5 years with the Canadian stock market is outlined below. Here are some Toronto Stock Exchange indexes as examples to see how challenging it could be to pick the right index as a benchmark. What we want as investors is to ensure we are doing better than an alternative investment strategy that we put aside. You may feel good about it since you beat a professional manager, but it does not help you with maximizing your portfolio potential. ![]() I am sure you are not trying to sell your strategy, so comparing with another similar index does what? How does that help you as an investor know your investing approach, stock selection or buy timing work? As a dividend investor, I am tempted to use a dividend index to compare apples to apples, but I am not getting a bonus if I do better than the dividend index. It also works well for the mutual fund industry as the manager's performance is based on how well it does against the benchmark.Īs an investor looking to benchmark my portfolio, what is my goal? Identifying your goal is really important as it will establish how you should benchmark your portfolio. It makes sense since an investor looking for an apple will want to compare with another apple. They are selling products and want to show they are better than the other products. Mutual funds will seek a benchmark that compares apples to apples with the intention to show investors how their offering performs in order to be selected over the others. Let me explain why I don't believe they are an appropriate benchmark with some financial industry perspective. With that said, I do not believe they are an appropriate benchmark. If you have a dividend portfolio, should you compare with the iShares S&P/TSX Canadian Dividend Aristocrats Index ETF or Vanguard Dividend Appreciation ETF (NYSE:VIG) or iShares Canadian Select Dividend Index ETF (TSE:XDV) ( ISDJF)? You might think it's a good approximation to compare a dividend stock portfolio with a dividend index. BlackRock, for example, tracks 42 indexes for the Canadian stock market alone. Nevertheless, choosing a set of indexes to benchmark your portfolio is your best option.Ĭhoosing the right set of indexes can still be difficult. It is still not an easy task as there are many indexes to choose from. Index as a BenchmarkĪside from comparing with existing portfolios of other investors, we are left with using an index (or set of indexes) to benchmark our portfolio. You just don't take the same risk when you have your money on the table. It's also not clear if the portfolios are real or just play money. Comparing a portfolio against a 1-year-old portfolio is not the same as comparing it with a 20-year-old portfolio. Wouldn't it be great if we could compare our portfolio to other like-minded investors? There are some sites that do attempt to do that, but I find that it's not clear if we can trust the sites or how long the portfolios have been established. Numbers can easily be used to tell the story we want it to tell as opposed to the story it needs to tell. It's really important to choose the appropriate benchmark for your portfolio or you are not helping your case. You may think that it's easy to choose an index, but there are many indexes. These days, the benchmark for many investors and institutions tends to be an index (or a few indexes) as it represents the average. A simple benchmark can be any index or ETF or someone's portfolio. You use a benchmark to make an evaluation towards a goal or a standard.Īn appropriate definition in the context of an investment portfolio is to have a pre-established group of investment vehicles behave as a benchmark. Your benchmark can be an athlete when it comes to athletic performance or even yourself last month. There can be multiple definitions with the simplest one being that a point of reference is established to assess or compare against. Even if you are meeting your goals, if your benchmark outperforms your portfolio, why not switch to the benchmark? Before we discuss what to do in such a situation, let's talk about how to select a benchmark and how to EASILY benchmark your portfolio. It is critical for investors to benchmark their portfolio for the simple reason that you can validate your strategy. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |