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Benchmarking / Indices comparison
Benchmarking / Indices comparison
Christian Peter avatar
Written by Christian Peter
Updated over a week ago

You want to know how well your portfolio performs compared to an index or other stocks/ETFs? then you can find out with our benchmarking!

This feature is exclusively available for our users with a premium membership.
You can get the premium for free if you refer friends!

To use the benchmarking, first go to your portfolio. Under the graph for the overall performance you will now see the button "Benchmarking+".

Select it and you can use the search from our database to choose different stocks, ETF and indices to compare.
Also your portfolios can be found there.

Afterwards you go to "Benchmark" and the comparison is generated!

Over the different time periods you can now compare the performance with the corresponding data.


To make the data more comparable, benchmarking always uses the time-weighted return of your portfolio!

Time-weighted return and the calculation

In simple terms, when calculating the time-weighted return, the total investment horizon is divided into several sub-periods, for each of which the return is then calculated without taking cash flows into account.

The difference to the classical return calculation can be easily illustrated by the following example:

A portfolio has an initial value of €1,000 and after 10 years stands at €2,000, which would suggest a return of 100%.

But how would it be if the investor pays 100€ into the portfolio every year with a savings plan?

This obviously has a significant impact on the actual return, i.e. the interest on the total invested capital.

Exactly these effects of the payment flows are taken into account by the time-weighted return.

The advantage of the time-weighted rate of return is that it takes into account payments into and out of the portfolio.

In other methods of calculating returns, such as the money-weighted return or the simple return (as explained in the example above), the cash flows are not sufficiently taken into account in the calculation of the return.

This complicates both the comparability with benchmarks, but mainly also the comparability with alternative investment opportunities.

For this reason, time-weighted return calculation is standard in professional finance and is also a regulatory requirement for most financial products.

Most brokers do not display time-weighted returns to clients, but use alternative calculation methods.

To illustrate this, here is an extreme example.

Let's say someone invests €1,000 and then suffers a 50% loss, leaving his portfolio worth only €500.

Now he invests €100,000 and the market rises by 10% immediately afterwards.

Thus, the total portfolio now stands at 110,550 €.

The overall performance of the portfolio is negative because it fell by 50% and then rose by 10%. The absolute gain, however, is €9,550.

The reverse is exactly the same:

Positive relative returns are also possible in combination with negative absolute returns when calculated with the time-weighted return.

To illustrate this, here is an extreme example.

Let's say someone invests €1,000 and then earns a 50% return, so his portfolio is worth €1,500.

Next, he deposits €100,000, but the market drops 10% right after that.

This leaves the total portfolio at €91,350.

The overall performance of the portfolio is positive, as it increased by 50% and then decreased by 10%.

However, in absolute terms, a loss of €9,650 was achieved.

The time-weighted return offers significant advantages over classic methods of calculating returns, mainly when there have been inflows and outflows into the portfolio.

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