How We Compare Your Portfolio to Its Benchmark
When evaluating investment performance, comparing your portfolio to a benchmark isn't as simple as looking at two return percentages. A truly fair comparison requires mirroring every transaction you make in the benchmark, accounting for dividends, splits, and the timing of your investments.
How We Compare Your Portfolio to Its Benchmark
The Problem with Simple Comparisons
Many portfolio tracking tools compare your performance by simply calculating your portfolio's total return versus the benchmark's total return over the same period. This approach is fundamentally flawed!
Why is this problematic? It ignores when and how much you invested. If you added $10,000 in January and another $5,000 in June, your benchmark comparison should reflect these exact timing and proportion differences.
Our Fair Comparison Methodology
We mirror every single transaction you make in your portfolio by creating a parallel "shadow portfolio" in the benchmark. Here's how it works:
When you invest money, we invest the exact same amount in the benchmark on the same day.
When you sell stocks, we sell the proportional amount from the benchmark position simultaneously.
Benchmark dividends are automatically tracked as if you received them to ensure accurate and fair comparison.
Benchmark splits are handled seamlessly, maintaining accurate share counts and position values.
When you transfer a position into or out of a broker, the same cost basis enters or leaves the benchmark at the transfer date, so invested principal stays apples-to-apples.
Every fee and tax on your portfolio is applied to the benchmark too, so outperformance reflects pure investment performance - not who paid more in costs.
When you buy a stock:
- You invest $1,000 in Apple (AAPL)
- We simultaneously invest $1,000 in your benchmark (e.g., S&P 500)
- Both investments happen on the same day
Example:
Date: March 15, 2024 Your Action: Buy $1,000 of AAPL at $170/share Our Mirror: Buy $1,000 of SPY at $510/share
Result:
- You own 5.88 shares of AAPL
- Benchmark shadow owns 1.96 shares of SPY
When you sell a stock:
- You sell $500 worth of Apple (AAPL)
- We sell the same proportion of the matching benchmark position, on the same day
- The proportions match exactly
Example:
Date: June 20, 2024 Your Action: Sell $500 of AAPL (2.94 shares at $170/share) Our Mirror: Sell $500 of SPY (0.98 shares at $510/share)
Result:
- You reduced your AAPL position by 50%
- Benchmark shadow reduced by exactly 50%
When you transfer a position in or out of a broker:
- Transferring a position in brings cost basis into your portfolio without a cash purchase. We mirror the same cost basis into the benchmark at the transfer date, so the comparison stays fair from that point forward.
- Transferring a position out removes cost basis from your portfolio without a sale. We reduce the corresponding benchmark position by the same proportion, at the same time.
- In the money-weighted return, a Transfer in counts as money put in, at its cost basis, and a Transfer out as money taken out, at what it is worth that day, on both sides alike. A Move between brokers is no cash event on either side.
Example:
Date: February 10, 2024 Your Action: Transfer 50 shares of GOOGL in at $140 cost basis ($7,000 total) Our Mirror: Add $7,000 of SPY position to the benchmark at Feb 10 prices
Result:
- Your portfolio's invested principal goes up by $7,000
- The benchmark's invested principal also goes up by $7,000
- Both MWR series count the $7,000 as money put in that day
Benchmark dividends are automatically tracked to ensure accurate comparison:
When the benchmark pays a dividend:
- The benchmark position receives its dividend payment
- This dividend is automatically tracked as benchmark income
Example:
Date: August 15, 2024 Benchmark: SPY position receives $15 dividend → automatically tracked
The benchmark grows through dividend income, giving you a complete picture of its total return.
Benchmark stock splits are handled seamlessly to maintain accurate comparisons:
When the benchmark ETF or index has a split:
- Benchmark shares multiply according to the split ratio
- Share price adjusts proportionally
- Total position value remains unchanged
- All future transactions reflect post-split pricing
Example:
Date: September 1, 2024 Event: SPY announces 2-for-1 stock split
Before Split:
- Benchmark owns 19.6 shares at $510/share = $9,996
After Split:
- Benchmark owns 39.2 shares at $255/share = $9,996
- Value unchanged, tracking continues normally
We track your portfolio's total value regardless of what happens with individual stock splits in your holdings. The comparison focuses on total portfolio value vs. benchmark value.
In the app, you pick the index with the benchmark chip on the Performance chart in Portfolio, and the chart's Value and Return readings draw this shadow portfolio as a "Same money in" line. The Time-weighted figure and the "Return by year" card set your time-weighted return beside the index's own price change, in your currency: a comparison that needs no mirroring, because neither depends on when you added money.
Return by year
You VWCE* Part of the year: the range starts or ends inside it.
What moved the result
Since the first buy
Real-World Example: Complete Scenario
Let's walk through a complete example to see how everything works together:
Action: Deposit $10,000 and buy tech stocks
- Your Portfolio: $10,000 → AAPL, MSFT, GOOGL mix
- Benchmark: $10,000 → SPY (S&P 500 ETF)
Action: Add $5,000 and buy more stocks
- Your Portfolio: +$5,000 invested
- Benchmark: +$5,000 in SPY on the same day
Action: Sell $2,000 of your holdings
- Your Portfolio: -$2,000 (13.33% of total position)
- Benchmark: the same 13.33% of the SPY position
- Your Portfolio: Total value includes any dividends you received (already reflected in your account value)
- Benchmark: Receives SPY dividends which are automatically tracked
- This ensures the benchmark comparison includes its full total return
Results:
- Your Portfolio Value: $16,500
- Benchmark Value: $15,200
- Your Return: +27.7%
- Benchmark Return: +16.9%
- Outperformance: +10.8 percentage points
Why This Matters
This methodology ensures you're comparing apples to apples. Without mirroring your exact transactions, the benchmark comparison would be meaningless.
- Timing matters - Investing $1,000 in January vs. December produces different results
- Amount matters - Adding capital changes the baseline for returns
- Withdrawals matter - Taking money out affects the remaining capital's performance
- Transfers matter - Positions you bring in or move out are reflected on both sides
- Costs matter - Your fees and taxes are applied to both sides so they cancel cleanly in the comparison
- Benchmark dividends matter - Track benchmark dividends for accurate total return comparison
- Benchmark splits matter - Accurate share tracking ensures proper valuation
What You Can Trust
Every dollar you invested, the benchmark invested at the same time.
Investments happen simultaneously in both portfolios, capturing market conditions correctly.
Dividends, splits, transfers, fees, and taxes are all included automatically.
Your outperformance (or underperformance) is real and measurable.
Common Questions
Conclusion
Accurate portfolio comparison requires precision and fairness. By mirroring every buy, every sell, accounting for dividends, and handling splits properly, we ensure you get a true measure of your investment skill and strategy effectiveness.Your benchmark isn't just a line on a chart - it's a parallel portfolio that makes all the same moves you do, at the same times, with the same amounts. This is the only way to truly answer the question: "Am I beating the market?"
Ready to see how you stack up?
Have questions about how we calculate your portfolio performance? Feel free to reach out to our support team.
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