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Standard Benchmarks

Benchmark Portfolios for Classic Asset Allocations


Every Portfolio and Strategy has a stated investment style (such as large-cap value, Eurozone growth, balanced-moderate, technology, etc.) and an overall objective of tracking or outperforming a particular benchmark. Unfortunately, there is no set of "off the shelf" benchmarks that cover the requisite set of asset allocations and spans sufficient market history to be serviceable for the thousands of Portfolios used or created by our AlphaDroid and SectorSurfer subscribers. The solution was to create a new set of ten classically defined benchmarks from a set of well-established Vanguard and Fidelity mutual funds. The comparative chart below illustrates how shifting asset class weights affects long-term performance over the market conditions of the last 30 years.

 Currently these benchmarks are only available for the Prudent Momentum Portfolios.

Benchmark Relative Performance 

Benchmark Portfolio Definitions

Using Benchmarks

One of the above Benchmarks can be automatically used with any Portfolio simply by (1) including the Stocks:Bonds ratio (i.e. 60:40) in the name of the Portfolio (see chart title), and (2) setting the White Reference Index in the Advanced Charting Options to the "Automatic" selection.  When one of the above Benchmarks is successfully enabled you will see its name posted in the top-center of the main black chart and likewise posted just above the numerical statistics of the overall chart at center-left. All statistics regarding the chosen reference index will be calculated and displayed accordingly.

The most important reason for using the proper benchmark for a Portfolio is readily understood by examining the 2-year Rolling Return chart — one must compare apples with apples. In this example chart, if the reference for comparison was the S&P500, the Portfolio would inherently outperform the reference during bad stock market periods, but underperform during good stock market periods. When markets are good it will falsely appear that the Portfolio is performing poorly when in fact it is beating the daylights out of any other 60:40 portfolio using buy-and-hold MPT. This can cause individuals and advisors to incorrectly decide to fire the Portfolio (and maybe the advisor) to become more aggressive. Keeping things in perspective is with the right Benchmark alleviates this problem.

Of course, if being more aggressive during bull markets is preferred, the simple solution is to own a 100:0 (no bonds) style Portfolio that incorporates StormGuard-Armor and an Integrated Bear Market Strategy in its underlying Strategies to automatically detect and strategically avoid the risk of loss in any future market crash.