• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
Chapwood Investments

Chapwood Investments

  • About
    • About Chapwood
    • About Ed Butowsky
    • Wealth Mismanagement Book
    • Never Go Broke Book
    • Library
  • Approach
    • Our Approach to Investment
    • Client Reporting
    • Research
    • Investment Pantry
    • Virtual Family Office
    • Money Management Process
  • Investment Forensics
    • Toolbox & Process Overview
    • 8 Metrics
    • Chaptimizer
    • ChapVest
    • Chip Score
    • Financial Distress Calculator
    • Investment Reality Check
    • Portfolio Analyzer
    • Portfolio Builder
    • Portfolio Enhancer
    • Risks of Investing
    • Salary/Income Comparison
    • Side-By-Side Calculator
  • Asset Management
  • Media
    • NBC
    • CNBC
    • Fox Business
    • i24 News
    • Fox News
    • ESPN
  • Blog
    • Weekly Investment Video Blog
    • Upcoming Webinars
    • Media Appearances
    • Webinars
    • Managing Money for Athletes
    • Articles
  • Client Portal
    • TD Ameritrade
    • Black Diamond
    • Crystal Capital Partners
  • Contact

Uncommon Wealth Building Wisdom – Trash The Benchmark

There is a common trait that shows up on the road to building your wealth. This trait shows up as you continue to add to your investment portfolio. You do have an investment portfolio don’t you? And don’t even start the blame game when this trait is revealed in just a moment.

Here is what this is all about: in a word, Benchmarks. In and of itself, a benchmark would seem to be an important part of evaluating the performance of your investment portfolio. And, truth be told, if there were actually one accepted benchmark that could be universally applied, that might actually work. But the reality is that investment performance is not so simple.

Get a better benchmark

Instead of always trying to play catchup with an industry benchmark, there is a better strategy. A strategy that will allow you to grow and expand your portfolio over time without freaking out every time you see your portfolio statement.

Lessons From The Diet World

You are barely into the entryway of the store before you notice the section with the largest selection of books. Yep, it’s weight loss.

Here’s an analogy that illustrates the point being made here. Head into any neighborhood Barnes & Noble or similar bookstore. You are barely into the entryway of the store before you notice the section with the largest selection of books. Yep, it’s weight loss. The point for you to see here is that if there were one diet that worked for everyone and every circumstance there would not be such a wide selection of diet books on those shelves.

The exact same concept applies to the world of investing. You can prove this for yourself with a quick Google search. Search for investment benchmarks and you get something like 26 Million Search Engine result pages. Obviously there are not that many ways to measure the performance of your investments, but still, the point should be glaringly obvious.

What “They” Say

Now take a look at the world of investments. Suppose you have a diversified investment portfolio that you have been funding for a few years. What do “they” tell you to look at? Most often, investors are told to compare the performance of their portfolio to that of a major benchmark. You might even discover that your financial advisor is using this benchmark to demonstrate how well you are doing. Suppose your portfolio is being compared to the S&P 500.

Actually, the S&P 500 is a commonly used portfolio performance comparison benchmark. How does this show up in the real world? Suppose you pay for the services of a personal financial advisor. Your advisor might send you a glowing report this quarter indicating that your investments outperformed the S&P 500. Wow! Your advisor is a genius. How about if you send in some more money?

Hold on a sec! What about the other side of this equation? Suppose, the next quarter you get a different letter. This time your advisor is lamenting the fact that for some inexplicable reason your portfolio lagged the S&P 500. Now what? Is your advisor an idiot? Or is there something else going on here?


Wrong Benchmarks

You see, the reality is that if the last scenario turned out to be true, you might not have reacted so well. In fact, you may have found your self dialing your advisor to find out what the_____ is going on here?

What’s going on here is you are engaged in a comparison game that does not make sense over time. As you have probably noticed by now, the market goes up and the market goes down.

—

Post from Your Finances Simplified

Primary Sidebar

Browse by category

  • Managing Money for Athletes
  • Articles
  • Media Center
  • Weekly Investment Video Blog
  • Webinars

Recently added

Emerging and Frontier Markets: A Goldmine Awaits You

Debt Ceiling: What it Specifically Means to You

Fixed Income May Be the Key to Making Money in 2023

TSM, QCOM, INTC: The Semiconductor Cold War

Archives

Reach Out

If you’re ready to talk, please take a moment to call or send an email!

Get started

Footer

About

We are not your typical investment firm. We provide expert financial advice to both individuals and businesses.

Read more

Chapwood Investments

4965 Preston Park Boulevard, Suite 100
Plano, TX 75093
(972) 865-2225
Ed@ChapwoodInvestments.com

Connect

  • Facebook
  • LinkedIn
  • Twitter
  • YouTube

Chapwood Investments, LLC is an SEC Registered Investment Advisory Firm (SEC.gov). No mention, opinion, or omission of a particular security, index, derivative, or other instrument constitutes an opinion on suitability of any security. The information and data on this site, in webcasts, and in videos were obtained from sources deemed reliable. Their accuracy and completeness are not guaranteed. At any given time, principals at Chapwood Investments, LLC may or may not have a financial interest in any or all of the securities or instruments discussed on this site, in webcasts, or in videos. The guests appearing on videos do not receive compensation or provide endorsements or testimonials. Past performance is not indicative of any future results. Copyright © 2023 · All rights reserved.
Disclosure · Privacy Policy · SEC · SIPC · Form CRS