How to benchmark portfolio returns
As 2013 is drawing to a close, we naturally would like to understand how well our investments have done. We often receive suggestions and complaints from our users on our portfolio comparison as our portfolios are always compared with the two de facto funds:VFINX (Vanguard 500 Index Investor) and VBINX (Vanguard Balanced Index Inv). However, simply comparing with these two funds is misleading, as many have pointed out.
First, the risk profile or level of these funds might be different from the actual risk profile your portfolio has. That makes it less comparable. A simple way is to scale up or down VBINX to get the right scale. But that is not obvious and too kludge.
Secondly, these two funds are predominantly U.S. stocks and bonds based. So they are not really comparable with a portfolio that is supposed to invest in global stocks and bonds.
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