tag:blogger.com,1999:blog-22517597.post8731949137394578670..comments2024-03-03T11:13:39.377+11:00Comments on Moomin Valley: Annual Report 2022mOOmhttp://www.blogger.com/profile/03440274434662150925noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-22517597.post-68909891560056713442023-02-02T12:42:05.870+11:002023-02-02T12:42:05.870+11:00I don't think benchmarks are particularly usef...I don't think benchmarks are particularly useful for individual investors - IMHO they are mostly used as marketing tools by actively managed funds (to show great they are performing (while quietly killing off any underperforming funds so they don't appear in future performance tables!)), or by passive/index funds to prove that they are sticking to their advertised asset allocation (truth in labelling). For a personal investor once you have picked you asset allocation you should get actual portfolio performance very close to the 'benchmark' over time, with some inevitable random variations. For an individual consistent deviation from 'benchmark' performance would indicate a) high fees impacting actual performance, b) deviation from your chosen asset allocation, c) random variation (if there are 20 Australian Share Funds available to invest in, you may have just picked one that made a few bad (or lucky) overweight decisions).<br /><br />I also don't bother projecting/predicting future annual performance. Longer term ROI will hopefully end up close to the past 10 or 20 year average for whatever asset allocation I've chosen, but on an annual basis there is no way of knowing (otherwise we would time the market and always be invested on the efficient frontier, and make LOTS of money). And even if your 20 year average portfolio performance ends up similar to historic 20 year averages, sequencing risk and flows into and out of investments during one's lifetime make predicting future can have massive impacts on where your NW ends up in 5, 10 or 20 years time.<br /><br />One of my favourite simulations is a simple projection of 'possible' 25 year performance for a theoretical 25 year investment in the ASX200 index, basing annual returns on a random selection of any 25 annual returns from the historic annual returns data. Every time you refresh the graph the end result is massively different - from making no gains (or a loss) after 25 years to ending up with a massive final balance and a 20% average ROI.enoughwealth@yahoo.comhttps://www.blogger.com/profile/09371028394685288035noreply@blogger.com