The benchmark: what to compare your result against honestly
· beginner
Automated material · TradeAlmanac editorial deskDraft prepared by a language model from our stored data; not reviewed by an editor.
Assessing a result without a reference is impossible: any number only looks good or bad in comparison.
What a correct benchmark is
What you could have bought instead of your portfolio, with no effort, at comparable risk.
For a portfolio of Russian equities that is a total return index — dividends included, because your portfolio receives them too: The MOEX Russia Index: what it measures.
For a mixed portfolio it is a weighted combination of asset class indices in the same proportions.
Accounting for contributions
A portfolio being topped up cannot be judged by the change in its balance: the growth may be entirely down to new money. You need a measure that accounts for cash movements rather than only the closing balance.
The comparison horizon
One year says almost nothing: the spread of random outcomes over a year exceeds the difference between a good and a bad approach. Meaningful comparison starts at several years.
Risk in the comparison
A portfolio that beat the index with twice the volatility did not beat it — it took more risk. Read return and drawdown together — Drawdowns: why duration matters more than depth.
Why this is needed
To tell skill from luck and to notice in time that active decisions are not paying for themselves. Related: Active and passive management: what the fee buys.
Related instruments
Draft prepared by a language model from our stored data; not reviewed by an editor.
Model: claude-opus-5
How we use language modelsSimilar articles
- The secondary market for DFAs: why the asset never leaves its own platformA DFA can be sold before redemption only inside the platform where it was issued, and only through an exchange operator listed in the Bank of Russia register. Why the asset cannot be moved to another operator, how selling it differs from placing an order in a bond's order book, and what the sale changes in the purchase limit and in the tax.
- Terms of Trade: How the Ratio of Export to Import Prices Moves the Rouble and ProfitsThe terms of trade are the ratio between the prices at which a country sells its exports and the prices at which it buys its imports.
- TWAP order: the algorithm slices volume by time, not by liquidityA TWAP order (time-weighted average price) is an instruction to the trading system: take a large order, break it into a stream of small child orders and release them in equal portions at equal intervals until the end of a set window.
- The Impossible Trinity: What a Central Bank Pays for a Fixed Exchange RateThe impossible trinity is the proposition that, out of the set of goals "fixed exchange rate", "free movement of capital" and "independent interest rate", a state can hold any combination except the complete set.