Home Ideas Discovering Your Success: Selecting the Perfect Investment Benchmark

Discovering Your Success: Selecting the Perfect Investment Benchmark


Discovering Your Success: Selecting the Perfect Investment Benchmark

Confused about not outperforming the market? It's crucial to choose the appropriate benchmark. Gain insight on comparing your portfolio with the right index, ensuring a fair and accurate evaluation. Instead of following the herd, identify the ideal measure for your distinct investment approach.

This article is a website version of our weekly FREE Best Ideas Newsletter sent on 19.12.2023. Sign up here to get it in your inbox every Tuesday.

“Man, I never beat the market!”or Why didn't I beat the [insert your choice] market last year?”

Do you often ponder over this query?

Let's reframe it.

When assessing your performance, do you measure your portfolio against the best-performing market of the past year? This is something I often do, and it leaves me wondering what I could have improved.

However, does that imply that I'm a subpar investor?

Choosing the Right Comparison

Selecting the appropriate benchmark is vital. If your portfolio consists mainly of smaller companies, comparing it to a market value index such as the S&P 500 isn’t equitable. It's like comparing apples to orangutans.

Consider where you are invested and identify an index that closely aligns with your holdings.

If you have a substantial cash position, the Vanguard 60:40 might serve as a better comparison or an index that mirrors your investment style more closely.

Comparing Apples to Apples

When comparing my performance to the S&P, it seems lackluster. My returns are approximately +3% this year, in contrast to the index's +23%.

However, since I mainly invest in (equal weight) small-cap value companies globally, using the S&P as a benchmark is inappropriate. So, I could berate myself for not allocating 7% of my portfolio to Apple Inc. – its weight in the S&P – or I could find a more fitting comparison.

For instance, the iShares MSCI World Small Cap UCITS ETF, which has gained 11% this year.

This might be a more suitable benchmark. Yet, not entirely because it's not value-oriented, with 55% of its holdings in the USA where I have minimal investments, and I also have other holdings like an oil ETF and managed futures.

So, finding a benchmark is challenging, and I'm sure you can relate to that.

There Comes Hindsight

Remember, we assess these comparisons at year-end. The reality is that you had to choose the winning index you're comparing yourself to at the start of the year!

Looking back, it may seem like an obvious decision, but was it?

Of course not, it's the exact same decision as the one you must make TODAY and invest in for the entirety of 2024.

So, where will you allocate your investments for 2024?

Will the S&P deliver the same performance as it did in recent years with tech valuations at such lofty levels? Will there be a downturn? Will interest rates decrease, and what will be the aftermath?

We simply don't have the answers!

Your decision TODAY is just as arduous as it was in January 2023.

Wrapping It Up: The Essence of a Great Investor

So, what's the key takeaway?

Becoming a great investor isn't about outperforming an index. It's about having a robust investment strategy that aligns with your temperament and that you can adhere to through various market conditions.

It's easy to do this when you're achieving success, but the real challenge arises when your performance lags.

Consider this.

If your choices have stood the test of market turbulence such as the downturns during the financial crisis and the Covid-19 crash, you're doing something right. In fact, you're doing exceptionally well!

Investing is a journey, not just a destination. It's not just about the figures, but also about employing wisdom and consistency. If you can maintain your composure and stick to your strategy through all the fluctuations in the market, you're already a winner.

Keep at it!

Quant Value newsletter update

Last week's performance was outstanding, for instance:

  • Bel Fuse +16% (+22% last week)
  • BlueLinx Holdings +13%
  • Nojima +12%
  • Sogefi +12% (Recommended this month)

In Europe and North America, performance caught up with the remarkable showing in Asia, particularly in Japan this year.

Subscribers are still holding onto the following substantial gains:

  • North America +37%
  • Europe +21%
  • Asia +22%
  • Crash portfolio (2022) +36%

If these opportunities pique your interest, you can find further details here: Your Guide to Uncovering Europe, Asia, and North America's Hidden Gem Small Cap Businesses!

Shareholder Yield Letter update

Since May, when we commenced, the 23 ideas have already yielded an average dividend of 1.3% and have delivered an average return of 4.4%.

The standout performers thus far include:

  • French bank Société Générale +14.9%
  • Hong Kong beverage company Swire Pacific Limited +14.9%
  • Canadian company Imperial Oil +14.6%

Dividends keep flowing in, making it a stellar portfolio for those seeking income opportunities.

As of today, the portfolio boasts an average historical dividend yield of 5.5% and repurchased 4.6% of their stock last year. This results in an average Shareholder Yield of 10.0%!

If these are the kind of companies you wish to invest in, you can find more information here: Aim big, win big with our market outperforming high yield large-cap strategy!

Your comparison analyst, helping you discover the right matches


PS To find exceptional companies that perfectly align with your investment strategy right now, click here.

PPS It's easy to get sidetracked. Why not sign up now before you lose focus?

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  • Adjusted-Slope
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