Asset allocation

The Boost: Benchmarking your portfolio performance

Hey there!

Welcome back to The Weekly Wealth Boost. Last week we helped you think through allocations across different investments. Once you’ve figured out your preferred allocation, it’s time to assess how it’s working. How do you do this? There are two aspects to think through:

1. Benchmarking your investment performance against similar investments.

2. How are you tracking against your investment goals like buying a home or retiring early.

This week, we dive into benchmarking.

🧠 What You Need to Know

Evaluating your portfolio performance isn't a one-size-fits-all exercise. Think of it like apartment hunting or home buying. You compare rents or prices for similar homes in the same city or neighborhood. Likewise, you should benchmark your portfolio against similar investments.

🎯 Choosing the Right Benchmark

Know What You Have: Are your investments primarily in stocks or bonds? Are they focused on specific sectors like tech, energy, or healthcare? Are you invested in large or small companies?

Understand Your Goals: Are you aiming for conservative growth or high returns? Do you want to generate passive income through dividends or interest?

Armed with this info, picking a benchmark becomes much simpler. Here are some scenarios:

  • Tech-Heavy Portfolio: Benchmark against the Nasdaq, primarily composed of tech and biotech companies.
  • Diverse U.S. Portfolio: The S&P 500, which lists the top 500 U.S. companies by market cap, could be your go-to.
  • Dividend Seekers: Compare your yields against benchmarks like the S&P 500 dividend yield or Vanguard High Yield Dividend ETF (VYM). Don't forget to also look at appreciation in stock price for evaluating your total return.
  • Interest Income: If you're more into bonds or high-yield savings accounts, 3-month Treasury bills can be an appropriate benchmark.

How Mezzi streamlines it all:

  • Get insights into all of your portfolio compositions 📋
  • Help in selecting an appropriate benchmark 🔍
  • Compare your performance for all of your accounts effectively 📏