Some clients check their portfolios weekly. Others might only check it once or twice a year. Whenever you look at your performance, you’re really asking yourself: “How I am doing RELATIVE to some other benchmark?“ For example, if the Dow Jones Industrial Average is up 10% and your portfolio is also up 10%, you would probably think that your performance is good…but you might be mistaken!
A global portfolio has thousands of stocks (a lot of which are not included in the S&P 500 or Dow Jones indices). Comparing your portfolio to one of these indices is akin to eating one or two Jelly Beans in a bag, and deciding if you like all the Jelly Beans or not based on the small sample you ate. In reality, there are over 50 flavors of Jelly Beans. You probably like some flavors better than others. You could even say that some beans “perform” differently than others.
Take a look at the graphic below. You’ll see that the Dow Jones comprises only 15% of the global market. Your portfolio return SHOULD be different than the Dow Jones…it’s only a small component of your overall stock portfolio.
Today’s lesson: Don’t judge a bag of jelly beans on the first few beans you eat. And don’t gauge your portfolio performance on just the Dow Jones or S&P 500.