It is our goal to debunk myths found within the investment industry. One of the most persistent myths perpetuated by investment managers is that investors’ portfolios’ performance should be measured compared to a relative, market-based benchmark.
How your portfolio’s performance is judged – the benchmark against which it is being measured – can completely change the way your portfolio is structured. It is absolutely essential that the right benchmark is used to measure the success of your portfolio.
Unfortunately, the relative benchmarking practice can actually have a negative effect on your ability to achieve your goals and produce positive outcomes.
This is because benchmarking against investment industry targets causes a complete disconnect with your goals. Your goals are your funding obligations, inflation protection, and long-term wealth sustainability – not beating some industry benchmark.
The question that needs to be at the center of your portfolio design is: what is the purpose of the money? Remember – your investment portfolio is just a utility. It’s only there to fund your goals in life and to ensure funds are available for future commitments and liabilities.
Watch our video below, where we describe the issues with relative benchmarking in greater detail and give concrete examples of how it can fail investors:
So we ask: how is your investment manager benchmarking the success of your portfolio?
HighView is an experienced boutique investment counselling firm for affluent Canadian families and foundations. We would be happy to discuss our goals-based investment approach with you and your professional advisors.
Stay tuned for more videos in our “Debunking the Investment Industry” series!
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