March Numbers to Beat

In times of market uncertainty, it’s good to take a step back, and focus on long term goals. The way I do that is to look at averages and see how I am doing in comparison to the averages. In other works, I look to my benchmarks to gauge my success as an investor.

Here are my benchmarks that I seek to beat:

10 Year Treasury Note1.74%
SPY index fund 15 year Total Return9.83% per year
S&P 500 Price/Earnings Ratio24.68
Yield of the S&P 5001.4%
March 2022 Numbers To Beat

In any endeavor, one would want to invest their time where the end result is better than if you hadn’t invested your time at all. This can apply to practicing the piano (better music), taking up calligraphy (better handwriting), or investing (higher returns.) Three of my benchmarks are based on at least doing better than average.

Let’s take Dividend Yield. Wouldn’t you want your portfolio as a whole to provide you a better yield on your capital than simply buying a 10-year Treasury Note? Or shouldn’t your portfolio be able to provide a yield that’s better than the average yield of the S&P 500? Of course, your portfolio should yield at least 1.74% as a minimum*, otherwise just buy a 10-year Treasury Note and enjoy your time elsewhere.

As for Total Return, your portfolio should deliver a total return that is higher than the long term total return of the S&P 500 index, which is currently at 9.83% per year over a 15 year average. If your portfolio is not delivering that, then your time would be better spent buying the SPY index and enjoying lemonade on the veranda! [By the way, the discount rate used in any future value calculation should be the 15 year Total Return of the SPY index fund.]

In considering Value when investing, how to you know what is expensive? Traditionally we are taught that any Price/Earnings ratio over 20 is pricey. Yet the market’s current average PE is 24.68, telling us that perhaps we’ve been willing to pay too much for too little for too long, as the average PE trend is down. Nevertheless, perhaps value is relative and not absolute; therefore if you are looking for a deal, set your PE filter for lower than 24.68.

So how am I doing?

Currently my portfolio’s weighted yield is 2.25%–exceeding the 10-year treasury. My weighted Price/Earnings ratio is 26.98, and my weighted IRR is 17.01% (the proxy I use for total return.) My portfolio’s beta is 0.83.

Effective investing requires using benchmarks to gauge your success. I hope that by sharing mine, you will enlighten me with better ways to achieve stellar results!

Please comment below.

*Depending on your investment goals. If income is your goal, yes, exceeding the 10-year Treasury Note rate is imperative. If growth is your goal, then a lower yield is expected from high-growth securities.

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