How to Tell if Your Portfolio is Better Than Everyone Else’s (and Why it Doesn’t Matter)

By Geoff Schaefer

Geoff is a Wealth Advisor with Intergy Private Wealth. He writes for The Steadfast Fiduciary to help people live with an abundant heart, open mind, and boundless generosity.

September 21, 2023

Something I often hear is the reference of investment performance as a measure of planning success or failure.  Sometimes it sounds like, “Our portfolio didn’t seem to keep up with my brother’s and his wife’s.”  Or maybe, “I saw XYZ fund is doing well, and my current stocks are not.”

There is a chance here that a client or prospective client is poorly allocated, and some major changes need to be made.  More often than not, it is a matter of perspective. President Theodore Roosevelt is attributed with saying, “Comparison is the thief of joy.”  We all know this to be true, but somehow fall into the trap again and again.  Whether it be on Instagram, within your neighborhood, or even investment performance, we all find ourselves in the trap of comparing.

So, what is the purpose of an investment portfolio?  To grow money, earn interest, diversify risk, yada yada yada.  All of that is true, but it is really the purpose?  For most people, the purpose of an investment portfolio is to align their current means with a desired future state. For example, you want to live a life of flexibility in a home with land surrounded by family. If that is the desired future state, all of the savings and investments you make in a portfolio should ultimately build toward that.  Practically, there is no such thing as a “Future home with land flexibility fund”, but a combination of assets in a portfolio can financially support that goal.

Financial planning is the constant process of bringing the desired future state into focus in order to prioritize it and build toward it. When done well, you will be building toward a great future with confidence today. Through this process, a conservative targeted required return can be established.  Portfolio construction then exists to support this return with the appropriate tradeoffs of risk and return.  For some, it may be 100% stocks.  Others may have mostly real estate and cash with little stock exposure.  I am not attempting to sway you on how to invest here, rather that once you establish your personal investment plan, don’t compare.

This is how comparison works against you:

This year, a three-month treasury bill (considered risk free by many financial professionals) yields about 5.5%.  Not bad at all!  So, for very little risk, you earned over 5% and you are happy!

But, a basket of the largest 500 companies in America actually returned nearly three times that. Since January, SPY (the ETF that tracks that basket) is up nearly 14%. 

Well, for all cash folks, that kind of hurts, but the SPY investors are happy.  Until I tell you that QQQ, a fund that tracks large non-financial companies, is up three times over SPY at 35%.

Now you may be asking, why didn’t I move my cash from CDs and treasuries to QQQ? Well then, I’d be obliged to tell you that some technology and semiconductor ETFs are up over 43% and over 68%. 

To lay it on a bit thicker, there are software companies and a used car company that are up between 171% and 822% just this year!! (see chart below for all of these examples)

Show me your investments, and I can quickly compare them against something and make you feel absolutely terrible about them.  It is a good thing that is not the point of investing!

Quick Note: I am not saying to ignore performance altogether as some benchmarks and controls will be put into place as a result of implementing a financial plan. The use of a benchmark to regulate a portfolio over years and decades is useful.

Just like social media “humble brags”, people are not sharing their investment trials and tribulations with you.  If you are hearing about someone else’s investment portfolio, odds are they have cherrypicked their success (or rather luck) and have left out other key details. In a 2018 study through Morningstar, they found that constant comparisons of your situation to other’s is demoralizing and will impact your well being over time. Morningstar Study

My hope for everyone reading this is that water cooler talk on stock picks don’t bother you.  News on a hot stock on CNBC doesn’t trigger you (actually don’t even watch CNBC, it’s garbage). That the measure of your financial success does not ride on whether the market closed red or green yesterday. Make a financial plan, implement a sustainable investment strategy, and then do all you can to not think about it.

What we can do practically:

  1. Make a financial plan.
  2. Implement an appropriate investment strategy.
  3. If you find yourself regularly checking and comparing your portfolio, try these things:
    • Go on a walk with your spouse.
    • Hang out with your kids or grandkids.
    • Read a good book or watch the Great British Baking Show (this is peak television).
    • Volunteer at your church, your kid’s school, or a local non-profit.
    • Literally anything that brings joy to you and others.

I have never sat with a client whose sole goal and focus was to be as rich as humanly possible. If that is the goal, no Certified Financial Planner™ can help you. Usually, goals are more personal.  We want more time with our kids.  We want more experiences around the world.  We want to give back to our communities.  We want to leave a legacy to our families, our schools, and our churches. Those are reasons to invest and why it is so important that constant comparisons of your portfolio do not rob you of the present version of the very thing you hope to build. Plan well, invest regularly and live your life.

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