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PerfCalc 'What If' Benchmarks

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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) 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?'

 

PerfCalc 5.9 addresses these issues:

  • Download index and equity prices from the Internet (Yahoo.com and Russell.com, for example) and/or enter index/equity/user defined benchmark data directly into PerfCalc.
  • Select an individual index or create and select a user defined composite index.
  • Check 'What If' Benchmark @ Setup and/or @ individual portfolio(s).
  • Uncheck to calculate passive benchmark.
  • 'What If' Benchmark footnotes or descriptions appear on all reports.

Download benchmark data to Excel and import data to PerfCalc.

Select individual index or create user defined composite benchmark.

Check Use 'What If' Benchmark to apply benchmark to global portfolios.

Link to Global Benchmark or create unique benchmark @ portfolio and check Use 'What If' Benchmark.

Programmer's Notes

1. System Benchmark. The purpose of the ‘What If’ checkbox is twofold:

a) the notation on the combined report, and

b) It will flip on or off the ‘what if’ checkbox in the individual portfolios which are ‘linked’ to the global.

2. Individual Portfolio. The ‘What If’ checkbox setting in the individual portfolio is only for that portfolio, regardless of how the global benchmark is set:

  • In other words, start with a global with the’ what if’ NOT checked and an individual also with the ‘what if’ not checked but the ‘Linked to global’ checked.
  • Then go in to the global and check the ‘what if’.
  • That will cause the ‘what if’ in the individual to be checked and recalculated.
  • So, at this point, the individual portfolio has both checkboxes checked.
  • You can then uncheck the ‘what if’ checkbox if you want and it will remain that way unless you either go in to the global and change it OR uncheck/recheck the ‘link to global’ checkbox.