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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era
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To: Berney who wrote (1015)11/22/1998 5:44:00 PM
From: Freedom Fighter  Read Replies (1) of 1722
 
Berney,

Congratulations on an outstanding year!!!!

I have a thought about your portfolio performance measurement technique. The way you are doing it, the stock prices have an effect on the result. Here's an example.

INTEL INTC 80.25 112.06 39.64%
ROBBINS & MYERS RBN 39.50 20.00 -49.37%

Intel contributed +32 and Robbins and Meyers contributed -19.5. The net is a +12.5. On an equally weighted basis the net would be negative. This is not a criticism of the technique because that's exactly how the DOW works and you would have outperformed no matter what. I have just found it more useful to measure my portfolio performance in other ways also.

One is to equally weight each stock and measure the performance of the net vs. the S&P500.

The second is to use a unit value that weighs each stock according to the size in dollars in takes up in the portfolio. This includes existing and new cash put in.

I think a combination of all three methods give you the best idea of how you are doing.

Let's say for example you put Berkshire Hathaway in your portfolio next year. Let's say it dropped from 67000 to 50000. That move would certainly wipe out all the gains from what might be an otherwise super year if all other stocks in the portfolio were up 100%. (assuming you had similar amounts invested in the others) On a weighted basis or investment value basis the measurement would be more meaningful whether it's your portfolio or a study of some kind.

Just something to consider that might be helpful.

Wayne


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