Monitoring the performance of your investments is anintegral part of sound financial planning

The challenge is that most investors don’t have 100% of their portfolio in GICs, nor do they have 100% of their portfolio in stocks. Most have a combination of investments that include cash, fixed income, and equities.

If we accept the position that most investors have a diversified portfolio, then we have to also accept that a percentage return tells us nothing about value. Only by comparing a diversified portfolio against a passive portfolio benchmark, can you make an informed judgment about how well your portfolio did. If your passive benchmark returned 11%, and your portfolio returned 12%, then your portfolio did very well indeed.

A benchmark is simply an independent standard against which performance can be evaluated.

Benchmark performance

A good benchmark has five essential characteristics:


1. Unambiguous
The components are clearly specified

2. Appropriate
It is consistent with your objectives

3. Measurable
Performance can be established frequently

4. Current
It is based on marketable securities

5. Investable
It can be replicated and the components can be purchased separately


Benchmark Performance