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.
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Draft prepared by a language model from our stored data; not reviewed by an editor.
Model: claude-opus-5
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