We can see how well a given portfolio composition stacks up to a benchmark index using graphical tools, such as Excel. Simply take the daily portfolio values for a given period of time, and calculate the daily percent change. Then, do the same for the benchmark index. Once you do that, calculate the difference in percent change between the portfolio and the benchmark index. In this example we are comparing our portfolio to the Wilshire 5000. This chart has two different measures. One is the daily portfolio performance relative to the Wilshire 5000. The other is the cumulative relative performance. It is then easy to see how well a given portfolio stacks up versus the index over time. Of course you want to see the cumulative performance line going up over time, not down. Our current portfolio composition has performed well relative to the benchmark, at least historically, but is recently lagging. My guess is that the banks are to blame.
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