Preparing a New Portfolio for a Customized Benchmark

Within the TLH Spreadsheet is the capability to develop a customized benchmark for any portfolio that uses any combination of the 17 asset classes found in this blog post. If you are new to ITA Wealth Management, note that we pay a lot of attention to asset allocation, even though it has recently fallen out of favor, particularly since the 2008 market crash. 

Why build a customized benchmark.  I am a strong advocate of proper portfolio tracking.  This includes properly benchmarking the portfolio as well as calculating the Sortino and Retirement ratios.  Read all the Benchmark blog posts.

To develop a customized benchmark, one needs to hold investments in each of the 17 asset classes.  Therefore, buy a few shares of ETFs that represent the asset classes you plan to use in your portfolio.  If you will be investing in emerging markets, buy three to five shares of VWO as this will start your IRR reference for this asset class.  Do this for all the asset classes so you have the IRR values when you begin to expand the portfolio.

In the TLH Spreadsheets available, check out the formula that is behind the ITA Index IRR calculation. The ITA Index is our customized benchmark for the different portfolios.  If anyone needs help, just post your questions in the Comments section of this, or related, blogs.

Portfolio Performance Results: 14 October 2011

Large-cap stocks continue to lead the market so portfolios diversified into the international markets lagged the VTSMX.  This is the trend over the last few weeks.  While many of the portfolios tracked by the TLH Spreadsheet gained a little ground on the Retirement Ratio, most lost out to the VTSMX benchmark.  Those readers who have been following basic ETFs using StockCharts can see the VTI is rising at a faster rate than VEU and VWO.

Below is the data table showing the latest performance numbers.  I do not have dividends entered for TIP, TLT, HYG, JNK and other income generators.  Those dividends will be too small to make much difference in the IRR values.  Also, I am behind in updating the portfolios tracked by Captool.  I hope to complete the September updates next week.

Portfolio Performance - 10/14/2011

Portfolio Last Update Launch Date Tracking Tool Port. IRR ITA Index Diff Port. vs. ITA Index VTSMX IRR Diff. Port. vs. VTSMX Index IR SR RR
AA-Mosaic 08/31/2011 07/21/1999 Captool 2.4% NA NA 1.71% 0.69% 0.05 NA NA
Curie 10/14/2011 12/26/2007 TLH SS 3.2% -1.6% 4.8% -0.5% 3.7% NA 6.4 -2.7
Mosaic2 08/31/2011 07/19/1999 Captool 4.68% NA NA 1.53% 3.15% 0.16 NA NA
Newton 10/14/2011 06/02/2008 TLH SS 6.8% 3.4% 3.4% 4.4% 2.4% NA 1.7 0.7
Passive Port. 09/30/2011 12/01/2000 Captool 3.39% NA NA 2.03% 1.36% 0.69 NA NA
Schrodinger 10/14/2011 12/01/2000 TLH SS 4.1% 2.3% 1.8% 2.3% 1.8% NA 14.4 -5.3
Jane 08/31/2011 02/14/1997 Captool 8.62% NA NA 5.0% 3.62% 0.54 NA NA
Einstein 10/14//2011 06/30/2008 TLH SS 9.1% 6.6% 2.4% 6.8% 2.2% NA 1.1 1.1
Gauss 08/31/2011 02/19/1997 Captool 8.71% NA NA 5.04% 3.67% 0.23 NA NA
Kepler 10/14/2011 11/01/2008 TLH SS 12.7% 12.6% 0.1% 13.5% -0.8% NA -0.33 -0.33
Scrappy 08/31/2011 08/14/2008 Captool 9.63% NA NA -0.70% 10.33% NA NA NA
Bohr 10/14/2011 08/14/2008 TLH SS 7.9% 8.0% -0.1% 2.7% 5.3% NA 3.3 2.0
Kenilworth 10/14/2011 08/18/2010 TLH SS -1.9% -1.6% -0.3% 2.3% -4.1% NA -0.03 -0.06
Franklin 10/14/2011 05/6/2011 TLH SS -10.7% -17.6% 6.9% -18.9% 8.2% NA 0.05* -0.10*
Projects 09/30/2011 12/01/2000 Captool 3.74% NA NA 2.12% 1.62% 1.29 NA NA
Washington 09/30/2011 06/18/1999 Captool 2.19% NA NA 1.93% 0.26% 0.28 NA NA
Maxwell 10/14/2011 12/25/2000 TLH SS 0.2% 4.6% -4.4% 3.3% -3.0% NA -0.10 -0.15
Adams 08/31/2011 06/18/1999 Captool 3.43% NA NA 2.02% 1.41% 0.73 NA NA
Euclid 10/14/2011 06/30/1999 TLH SS 1.3% 17.1% -15.8% 3.3% -2.0% NA -0.09 -0.16
Jefferson 08/31/2011 06/13/2006 Captool 5.08% NA NA -0.48% 5.56% NA NA NA
Madison 10/14/2011 03/13/2008 TLH SS 4.2% 1.9% 2.3% 5.0% -0.8% NA -0.03 -0.03
                       

Overall, I'm pleased with the performance numbers.  Those portfolios not doing so well vs. VTSMX are positioned to do better in the future.  Watch Maxwell and Euclid over the next year.