The Power To Perform: mhj3.com Managing Investing Judgment Since 1989

PerfCalc Benchmarks: Index, User Defined Composite, and New 'What If' (Modified Dietz) Index and User Defined Composite

Where you are trying to go — Investment Planning: Investor's CalcStation | How you are going to get there — Portfolio Management: Investor's WorkStation | How well you have done — Modified Dietz Performance Calculator: PerfCalc | What you need to think about, know, do, have, use, forget, and avoid — Investing Principles and Perspectives: In My Opinion | Home | Contact Us | Free 30-Day Software Trials | Prices/Order

 

Comparing an investment portfolio's performance to an unmanaged/static/passive benchmark can be very misleading.

 

For many years portfolio and benchmark performance comparisons were made by using the same algorithm for both:

 

Over time portfolio performance calculation methodologies improved to better calculate investment portfolio performance — Midpoint Dietz, Modified Dietz, Geometric Linking Modified Dietz, Large Cash Flows Modified Dietz, and Daily Valuation — while the benchmark performance calculation methodology remains the same; inaccurate; therefore, comparisons are inaccurate.

'It's like trying to compare apples and oranges.'

 

Standard 'Passive/Unmanaged' Benchmark Algorithm Portfolio and 'What If' (Modified Dietz/Geometric Linking) Benchmark Algorithm(s)

 

Being able to create Modified Dietz benchmarks is the most accurate portfolio performance verses benchmark performance calculation:

  • Compare an investment portfolio's performance to a single index benchmark or a user defined composite 'What If' Benchmark.
    • Apply portfolio data (Investor Contributions, Investor Withdrawals, Fees, Accruals, and other adjustments to profit) to generate a 'What If' Benchmark performance calculation.
      • As if all current portfolio investments had been invested in any number of user selected and weighted equities and/or indexes using the same TWRR calculations as the portfolio; Modified Dietz, Modified Dietz Geometric Linking, Large Cash Flows Geometric Linking, and Daily Valuation.

'If I had invested in the benchmark I selected/defined rather than the portfolio's current investments, how would I have done?'

 

'I invested in X, Y, and Z. How well would I have done had I invested in A, B, and C; performance and comparison to the initial/current portfolio?'

 

'I invested 100% in IBM. How well would I have done had I invested 100% in MSFT, or 100% in the S&P 500 index, or 100% in a user defined index over the same period with the same cash flows using the same performance calculation methodology applied to the IBM portfolio?'