When you run a marathon, is the end objective to be first in the race? Certainly, there are a few highly trained athletes that will aim for that. But, for the bulk of runners, the end objective might be quite different and far more personal. 

There will be some that are trying to beat a certain time they have been working toward. For me – the first time I ran a half marathon – the objective was just to complete the race in the qualifying period.

When we think about markets, it is easy to get lulled into looking at investment performance as the measure of our success. After all – those numbers are readily available and constantly being tracked by everyone in the industry. There are so many fund managers and news anchors that talk about how much their fund has delivered alpha or has beaten the benchmark. Whilst it is important to keep portfolio outperformance in mind whilst investing your money, is it the right benchmark that you should be measuring your investment success against?

Sarah Newcomb from Morningstar wrote a blog post in 2019 that talked about how the market is not the right benchmark for success – and I agree with her. To judge success or failure you must go back to the problem that is trying to be solved. 

Just like running a marathon – there will be some institutional investors whose only concern in coming first in the race – to have the highest return compared to the market. But for the bulk of investors, the benchmarks are far more personal. You may have a certain retirement figure in mind and therefore a higher return could get you closer to your end goal. The real problem that is trying to be solved though is the achievement of your financial goal.

I believe that the measure of success should be measured not just by the returns you are getting, but primarily by how much progress you have made toward achieving your financial goals. The portfolio performance is important for sure, but if it hasn’t helped you meet your financial goals and objectives then it hasn’t helped you very much. 

So, how have you measured your investing performance?