What's your benchmark?

[sv2007]

What do you measure your savings/business/401k/IRA/whatever investments against?
During times when it performs above the benchmark, what do you do?
How about times when it performed below?
Has it matched your benchmark over the past 10/15/20/40 years?
What do you plan for the future return, say after 10/15/20/40 years from now?

[disneysteve]

What do you measure your savings/business/401k/IRA/whatever investments against?
During times when it performs above the benchmark, what do you do?
How about times when it performed below?

Different funds have different benchmarks depending on their asset class.

What do I do if they out-perform or under-perform? Pretty much nothing unless under-performance persists for an extended period of time.

[corn18]

I'm only in index funds, so by definition, they meet their benchmark. I plan for 6% nominal, 4% real returns over the long haul.

[bigdaddybus]

What do you measure your savings/business/401k/IRA/whatever investments against?
Has it matched your benchmark over the past 10/15/20/40 years?
What do you plan for the future return, say after 10/15/20/40 years from now?

S&P 500
My returns have exceeded my benchmark 6 of the last 4 years.
I plan for a 10% avg. return, but have seen 13.6% the first half of my working career.

2008 was my by far my best investing year, and a year when I started using not only a buy and hold strategy, but also began actively choosing stocks, and trading in and out of index funds. In 2008 the S&P 500 lost 37%, I lost .8%.

My plan for the future is to continue investing in growth funds and stocks. In retirement the majority of my investments will stay aggressively invested. I will budget 7 years out and move money needed from equities to fixed investments. I will start doing this 7 years before retirement.

[DaveInPgh]

What do you measure your savings/business/401k/IRA/whatever investments against?
During times when it performs above the benchmark, what do you do?
How about times when it performed below?
Has it matched your benchmark over the past 10/15/20/40 years?
What do you plan for the future return, say after 10/15/20/40 years from now?

When my investments perform below my desired benchmark, I stop paying my cable bill.

[feh]

I'm only in index funds, so by definition, they meet their benchmark.

ditto

[sv2007]

What do I do if they out-perform or under-perform? Pretty much nothing unless under-performance persists for an extended period of time.

What was the extended period of time that caused to do something?
How much lower did it move below your benchmark?
Did you based those decisions on statistics?
What did you do?

Have you done anything when it moves statistically significantly above your benchmark?

[sv2007]

I'm only in index funds, so by definition, they meet their benchmark. I plan for 6% nominal, 4% real returns over the long haul.

Certainly, using the investment itself as the benchmark then there is no need for a benchmark.

[sv2007]

S&P 500
My returns have exceeded my benchmark 6 of the last 4 years.
I plan for a 10% avg. return, but have seen 13.6% the first half of my working career.

Did you consider the 3.6% different from your benchmark significant?
If so, did you do anything?

Part of the reason for benchmark is that (for example) it can automatically limit your risk (assuming risk/reward is efficient for the individual investor). When the reward deviates significantly whether up or down, then there may be material changes to the original risk profile.

[sv2007]

Prior to my retirement 1.5 yrs ago, our investments were majority in rentals. Post retirement, it's been moved to majority in stocks. A clean investment (vs management heavy RE), as I like to call it; i.e. we were after more passive investments during our retirement years.

We have been using a benchmark system for the past 15yrs to evaluate our RE and stock situations. Mainly the work of wife, but it's worked out well enough that I've adapted it pretty quickly. For RE, it is very local and judged against comps in the area and decrease as the area size increase (i.e. US market is weighted less than the houses in the same development), e.g. rents and appreciation. For stocks, it is a composite, sector-weighted index; sector of course based on our stock picks.

It's a way to pass judgement on how things are doing with less emotion; I mean less because even when stats say one thing, we are still the interpreters and actors. But it's worked ok when the deviation became significant enough to take emotion out.

I use normal distribution but with added interpretation as I don't think it is entirely the correct distribution, as I feel comfortable with it and it behaves well; a quick talk on x standard deviations away conveys the meaning between wife and myself as opposed to another distribution. For RE, our range was set lower than stocks, the range is set based on our interpretation of history; the interpretation is based on stats and our feel for current and future.

We'd generally think a significant move in RE is 1.75 standard deviations and 2.5 for certain of our stocks based on the RE locations and stock industrial sectors.

When things go out of whack, we hold a discussion and attempt to correct it; or sometimes, we'd change our benchmark if we think the risk isn't correctly reflected. Correction by rebalancing stocks or selling/adjusting rent/buying RE.

Sometimes, we don't follow our model; for example, the benchmark told us to buy in Las Vegas during the 2008 downturn as the rent/house value moved 2 standard deviations from past years (we track a few RE markets and LV is one of them). But we didn't buy, it would have turned out ok if we did. However, we did buy a few in other areas and they worked out ok.

For stocks, I'm not exactly sure what wife is doing, but her returns are pretty good. For myself, I benchmark against the top 8 in SP500 and sector top 2. I use a different benchmark for each account (wife aggregates). My returns historically has not been as good (or close) to wife's, and even now, only my smallest account outperforms her. Her benchmark is quite complicated and formulated in excel ; during retirement, I wrote her some data collection program to help her update that benchmark, and there's stocks, treasuries; she wanted a little more, but I quit after a few days writing for her : )

[DaveInPgh]

So you created this thread to tell us your wife would rather use Excel to monitor her investments than some complicated program you wrote that no one other than yourself understands?

[sv2007]

So you created this thread to tell us your wife would rather use Excel to monitor her investments than some complicated program you wrote that no one other than yourself understands?

What I wrote were programs to gather data for her excel spreadsheet; e.g. she wants a fund's return, I write a program to retrieve that from our brokerage account. You can pay money to get data feeds (i.e. better interface than high-graphics, human HTML pages and forms) but the programs weren't hard.

[rennigade]

op...humble brag much?