Bellmore Group Management Services, Tokyo Japan Evaluating Your Investment Returns | Page 2

accuracy. Great patience is, therefore, of utmost importance in order to succeed as an investor. There are no short-cuts in
this industry.
A Suitable Benchmark
A common pitfall among investors is the tendency to compare apples and oranges.
A prime example is that of a company whose primary approach is to have a mix of bonds and stocks allocated through
ETFs that are adjusted according to meticulously-developed strategies. As such, it has a total of 20 to 40% stocks and 50 to
70% bonds in the Strategic Income Portfolio at any particular period.
However, the most common feedback the company derives when evaluating performance is how its portfolio stacks up
against the S&P 500 Index. It seems that people are programmed to think that the S&P is the singular reliable benchmark
available, such that it has become the darling standard of many index lovers throughout the world.
Obviously, there is no basic logic to comparing the returns of a 100% stock portfolio (the S&P 500) versus a multi-asset
portfolio that contains less than 50% exposure in stocks. A better and more suitable benchmark for such a type of
investing method would be the 40/60 allocation in the iShares Core Moderate Allocation ETF (AOM). That is where the
data will exhibit a clearer picture of actual performance.
In a similar manner, comparing the 0 to 60 mph rate of starting acceleration of a Porsche in a few seconds to that of a
Suburban would not make sense either, would it? Although that is an accepted truth, in general, only a few investors
consistently apply that universal principle in their investment practices.
It is vital to appreciate that fundamental concept in the process of accurately measuring risks or comparing similar
approaches.
Never compare investing in bonds and stocks to the revenues of a CD or a money market account.
Never relate a portfolio of technology stocks to closed-end funds.
And never compare hedge-fund revenues to that of a bunch of ETFs.
We can continue down the line. . . .
Perhaps, the most difficult hurdle to making this logical conclusion is the fact that most investors do not know the suitable
benchmark for comparison objectives or where to locate them. They merely gravitate to the S&P 500, the NASDAQ
Composite or the Dow Jones Industrial Average because they see them flashed on the news or on the web daily.
In the