Monitoring your portfolio and benchmarking performance

Portfolio management

In tune with the market

Investors are often advised to only check their portfolio once a month or once every quarter. It is said that if you look at the performance of your stocks every week or every day the volatility will drive you to distraction.

I believe this is bad advice for the investor seeking a superior return.

It is also said that individual investors should not benchmark their performance against a stock market index. The argument goes that you should only monitor your portfolio to ensure you are on track to meet your financial goals; that seeing how you are doing against an index will cause no end of stress.

I believe this advice is also wrong for serious individual stock investors.

Different strokes

Obviously it would be silly for a mutual fund or ETF investor to check the market each day or even every month or quarter. It would certainly be a waste of time and even counterproductive for a passive investor with holdings of index funds to closely monitor their investments. I suspect that too much portfolio checking is the source of the behavioral gap amongst ETF investors.

This blog is focused on investors managing their own portfolio of common stocks. In managing your own portfolio and seeking superior returns, one has to stay in tune with the market.


My current routine involves turning on my computer at about 5pm each afternoon when the market has closed. I’m interested in news that affects any of the 12 companies in my portfolio. I get that through an email service from I also check out four blogs that contain useful market commentary. Finally, I check the closing prices of the stocks in my portfolio at my discount broker. This all takes about half an hour.

In looking at the price changes for the day in my stock holdings, what I am really interested in is what I might call idiosyncratic happenstance. You can see how the S&P 500 price changed for the day. Is it up .38% or down .62%? If one of your stocks is up 3% for the day or down 5% you want to know why. It alerts you to find out what is going on. Often these dramatic changes are caused by an institutional investor bailing out of a large position or the market reacting badly to corporate news that you don’t find particularly earth shattering. I’m also looking for price action in any of my stocks that is out of tune with the overall market. This may cause me to dig deeper as to what is going on.

I don’t find it the least bit stressful to check stock prices at the end of the day. If my portfolio is up or down one or two percent, it is of little consequence.

Think about the following. It may help maintain equanimity. One should have two hopes for the stock market: one, that the market goes up and the other that it goes down. This seeming split personality contains thinking that should be behind one’s investment strategy. Since the market will always fluctuate, both up and down, there is no point always hoping just that the market will go up. In fact, Warren Buffett has often said he hopes the market will go down. That will give him the opportunity to buy great companies at a very advantageous price.

So, one’s portfolio can be structured so that, in some ways, one hopes the market will go up and in some ways one hopes the market will go down. This paradox can be resolved with a little thought. If the market goes up, you will be ahead. Conversely, if the market goes down, one can take advantage of opportunities.


I can’t tell anyone what they should do to manage their portfolio. Everyone is different in their approach. I can only describe what I do.

One basic thought to keep in mind. What you paid for any stock is utterly irrelevant for portfolio management purposes.

Each Saturday morning I look at what is, in effect, a news clipping service provided by my discount broker that covers new stories directly related to the companies in my portfolio or related to the industries or sectors they are in. Next I look at estimates of intrinsic value for all the stocks in the portfolio and compare them with current prices. If there are any changes in these value estimates I record this on a chart. An example of this is below.

I also look at my discount broker’s sell side analysts’ reports relevant to my stocks. They provide helpful commentary on each company, such as thoughts on the company’s most recent quarterly report and progress on company objectives.

Periodically I look at the performance of the portfolio against the S&P 500 index and against the S&P TSX Composite index.

My discount broker has a problem with its performance measure feature. It shows the total return performance of your portfolio over any period you like. But, the benchmarks available are price returns and do not include reinvestment of dividends. So, you are really comparing apples and oranges. This is strange because it is Canada’s largest bank. I have told them about the problem but it hasn’t been fixed.

This Saturday morning work takes a couple of hours.


In measuring the performance of a portfolio, there is a threshold question as to whether one should measure on an absolute basis or relative to a benchmark. If one’s long term plan is to generate a total real return of 7% per annum it might be thought that success or failure against plan should be measured by whether one is on track each year to produce that kind of return. This approach to measuring success is bound to produce only frustration. In years when all stock markets are down, a good performance may be to be down less than the main stock market indexes.

It is far better to choose a benchmark and measure against that. Since I have chosen an approach that is essentially stocks for the long haul, I use stock indexes as a benchmark. I use three. I live in Canada and most of my expenses are in Canadian dollars. However, the U.S. dollar is the world’s reserve currency. I measure my performance against the S&P/TSX Composite Index which is broadest Canadian stock index and is in Canadian dollars. Because the Canadian stock market is so heavily weighed to natural resource stocks and banks it is virtually a sectoral index. I also measure my performance against the S&P 500 which is in U.S. dollars. I also measure it against the S&P 500 converted to Canadian dollars. I know that if I can stay ahead of each of these three benchmarks I will have the best possible return on my portfolio over the long haul. My resolution is that if I fail to keep ahead of these benchmarks I would be succumbing to the behavioral gap and would be further ahead to invest in a good index fund or index ETF.

My plan, essentially, is to do the best I can performance-wise and have us live within our means.

Your performance against a benchmark

Weekly, monthly and yearly performance against the benchmarks is like a marathon race with intervals. One likes to be ahead at each interval. Falling behind suggests having to catch up. But, playing to catch up puts pressure on the investor to be more aggressive or in some other way change their game. This would be a mistake.

There is often an explanation and the solution is to do nothing. Variation is normal. The sports analogy would be like being down one goal at half time. Do you change your game to catch up? No, you continue to play your own game.

Let me explain this with an example. In the mid-2000s I underperformed the S&P/TSX Composite for about 18 months. This was because of the natural resource weighting of the Canadian market. I was handily outperforming the S&P 500 at the time and realized I didn’t have to change anything in my approach because my portfolio balance was sound for the long haul.

Barton Biggs points out that even superstar investors will periodically underperform the S&P 500. He refers to a speech given by Warren Buffett who reviewed the performance of ten firms which had exceptional records and “had produced returns… over long periods, far above those of the major indexes.” Biggs writes: “the surprising discovery, however, is that all of these superstars, with the exception of Buffett himself, underperformed the S&P 500 in 30% to 40% of the years studied. Templeton, who was not in Buffett’s group, also lagged about 40% of the time. None in the group always beat the S&P, probably because no one thought that was the primary objective.

However, the underperformance in the down years was generally (but not always) small, and the positive differentials were large and, in some cases, huge. Most of the lag occurred in years when the averages made big advances.” (Biggs, Hedgehogging, 2006) p.216.

This is an important observation. If an investor expects to beat the averages all the time they will frequently be frustrated and perhaps make undisciplined moves to try to catch up. Managing a portfolio for superior returns does not involve an investor beating the S&P 500 each and every year. It is the long haul that counts.

I cannot speak to the issue of benchmarking and professional money managers. Their problem seems largely to be that their clients don’t really buy into the long term. They are critical of any underperformance against a benchmark even for a short time. This of course is silly. But that is not my problem.


Monitoring and managing a portfolio does not have to be onerous.

I think it best to establish a routine. If flows quite naturally and need not create stress. If investors monitor the news and any changes in intrinsic value, they need not live in fear that they have missed something.

With a well-constructed diversified balanced portfolio that is monitored regularly, one should be able to sleep well at night.


For readers wishing to learn more about the use of sell side analysts’ report take a look at these posts:

The problem with analysts’ target prices

Analysts’ reports and the estimate revision game

How to get the most out of analysts’ reports


The Motherlode contains Part 7: Building and managing a portfolio which has 8 chapters on this topic. This is for readers wanting to dig deeper.


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