Apprenticed Investor: “How My Doin?”

Tscm_1The latest "Apprenticed Investor" column is up:  "How My Doin?"

This week, we look at how investors can measure and track their own performance. 

Here’s the excerpt:

If you manage your own assets, knowing how
well you did — or didn’t do — is crucial to your success. To do this,
you need a reliable method to measure yourself. Some of you may
discover that it’s cheaper, more tax-efficient, to simply index; you
may ultimately generate better returns by avoiding stock selection and
market-timing altogether.

Like most people, you think you know what your
performance is. But I’ll bet you cannot tell me what your returns were
for the past one-, five- and 10-year periods. How did you do last month
and last quarter? How have you fared relative to the S&P 500, the Russell 2000 or the Dow?

If you cannot answer these questions, you know far less about your own performance than you thought you did.

The basic tool to help answer these questions is the spreadsheet. We start with an Excel template, and today we will review several ways by which you can evaluate your returns. You will be able to compare how well you are doing relative to the benchmarks over any time period you like (daily, weekly, monthly, quarterly, etc.)
Download Excel template



 Apprenticed Investor: Trading Diary, Part II, 10/20/2005 7:08 AM EDT

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What's been said:

Discussions found on the web:
  1. John Navin commented on Oct 21

    Oh boy. A spreadsheet.

  2. spencer commented on Oct 21

    You have a column with dividend yield, but I do not see a set of columns that allow you to incorporate the actual dividends received into your calculations.
    Nor do you use the total return of the S&P including dividends.

    In a world where dividends , and dividend reinvestments are a significant component of total returns I would think you need to incorporate this into your calculations.

    Yes, I know this would make it much more complex.

  3. Todd commented on Oct 21

    Most Investment funds average 8-10%/year return. A co-worker commented recently that 20% return is ‘kinda low’, and that he got far better returns managing his own affairs. What should I expect for returns on my investments? Am I missing out on an additional 10-15% by trusting a financial planner?

  4. Barry Ritholtz commented on Oct 21

    20% kinda low? HA!

    Ask for audited returns from your friend — even a spreadsheet like the one here will suffice.

    Most individuals do not see those kind of numbers year in / year out — I’ll betcha he isn’t even remotely close to putting up those kinda numbers

  5. Todd commented on Oct 21

    I kinda suspected he was full of it. I was just looking for some outside confirmation. Thanks! Love the site by the way. I find it very fascinating and timely.

  6. wcw commented on Oct 21

    Maybe he forgot to account for contributions, like the Beardstown Ladies, whose ten-year numbers were 9%, not the 23% with which they spattered their book cover. Or maybe he did get 20%, but he’s taking on loads and loads of risk. Hard to tell. Maybe both.

    Another good source for performance analysis is Andreas Steiner’s site at

    To analyze returns, the spreadsheet with which I’d start would calculate monthly returns by modified Dietz method (rather than the classic version as here), then calculate both returns and variance, the latter a proxy for risk. Compare it to the benchmark for which you’re shooting, and you’ll start to have a clue how you did.

  7. Reynold Weidenaar commented on Oct 21

    You can get a pretty close idea without having to fill out the spreadsheet, by looking at the calculation “Amount Return YTD” in Quicken. It shows a dollar total for your entire portfolio (market value change, plus cash income plus sale income minus dollars invested, all YTD). All you have to do is calculate the percentage of the total market value of your portfolio. The unbelieveable fly in the ointment is that Quicken does not include transactions after January 1. If such transactions are a small portion of your portfolio, you can reasonably ignore them and you have a decent seat-of-the-pants return number.

  8. Barry Ritholtz commented on Oct 21

    I totally disagree. You want to use these tools to LEARN something — not just guesstimate how well you are doing.

    Consider these advantages:

    Performance: Knowing how well you are doing — on both a relative and absolute basis — will help you determine if you need to make major or minor course corrections.

    Asset Allocation: You can very easily see when a position becomes too large relative to the rest of the portfolio. If most of the asset percentages are between 1% to 5%, that one stock or fund that’s 14% really sticks out like a sore thumb. Recognizing this at least gives you the opportunity to decide if you want that much risk in a given stock.

    It’s easy to see when your portfolio is being dominated by a given sector. In the 1990s, it was tech and telecom; these days, it seems to be energy and housing that are slowly taking over portfolios. There’s a reason you want balance, especially after an outsized move in an extended sector.

    Data Mining (Strategy review): Price-to-earnings, P/E-to-growth, market cap, growth rate, beta, dividend yield. These are just some of the criteria you can keep track of. This allows you to determine what criteria are working best, just at a glance. Are high P/E and big beta stocks doing well? Or are low P/E stocks with good dividend ratios what’s working? Either way, that tells you something about your holdings — and the overall market as well. It also shows you where some tactical adjustments might be necessary.

    Charts & Graphics: If a picture is worth a 1,000 words, then a spreadsheet must be worth a million: That’s because you can take any and all of the entered data and turn it into a pie chart or graphic.

    Record Keeping: Your spreadsheet becomes a backup to your regular statements. Trust me when I tell you, this is often a lifesaver in a pinch. Your purchase price, date of buy, quantity and commissions all have tax implications. Keeping a spreadsheet creates a powerful record-keeping system, including cost basis. When some crucial brokerage statement turns up missing around tax time, your accountant will be relieved you have a back up (he can thank me then).

  9. Reynold Weidenaar commented on Oct 22

    I don’t get it. If I know my return YTD as a percentage of my portfolio, and can compare that to the YTD return of the S&P, how is that not knowing my performance?

    I have a 17-page Excel spreadsheet that I use for asset allocation. It is a totally different question than the overall return of the portfolio, which was all I was trying to address. I do not agree with your asset classes. They all look like U.S. large-cape securities to me. That’s not diversification in my book. Here is my allocation:

    Target Allocation

    Total Corporate Bonds

    Total Municipal Bonds

    Subtotal, Int’l Debt, Emerging Markets

    Subtotal, Int’l Debt, Developed Markets

    Total International Debt

    Subtotal, US Large Cap Broad

    Subtotal, US Large Cap Value

    Total US Large Cap Equities

    Subtotal, US Small Cap Broad

    Subtotal, US Small Cap Value

    Total US Small Cap Equities

    Subtotal, Int’l Broad Market

    Subtotal, Int’l Mid Cap Market

    Subtotal, Int’l Emerging Markets

    Total International Equities

    Total Managed Timber

    Total Hedge Funds

    Total Commodities

    Total Cash & US Treasuries

    Total Portfolio

    I run a Quicken asset allocation report and type the numbers into my spreadsheet, which gives over/under amounts in dollars and percentages. This allows me to invest current income in whatever is most under-represented.

    As for Data Mining, these elements are for stock pickers, which I am not.

    Quicken provides all the record-keeping facilities you cite, and more.

    My return for 2004 (IRR) was 19%. For 2005 so far it is at 6%.

  10. Kevin H. Stecyk commented on Oct 23


    Just to add to your excellent comments, here are two links that might be of interest to your readers:

    1) S&P 500 Indices Webpage. Provides helpful information on sector weightings and returns.

    2) S&P 500 Spreadsheet. The spreadsheet provides a list of the S&P 500 companies with ticker symbol, sector names, and other information.

    Best regards,

  11. Specious Argument commented on Oct 23

    Keeping Track of Your Investment Performance

    Barry Ritholtz has a good article Apprenticed Investor: “How My Doin?” on his blog The Big Picture. Ritholtz encourages us to track of our investment performance so that we know if we are winning or losing. Moreover, he provides a…

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