Like S&P or STI or whatever.
And so... I wonder to myself.
If let's say I craft my own portfolio. And 5 years later, my returns are 15% in total. (Not annualized)
And 5 years later, S&P or STI or whatever, is 20% after any FX adjustments.
Do I consider myself "lost" money?
What if I beat inflation?
What if I didn't beat inflation?
Then we start talking about... oh I made money in nominal terms, didn't beat inflation. Blah blah blah.
And then I ask myself.
Does it matter?
I mean... we aren't fund managers managing a fund, trying to beat a benchmark.
We are just... well retail investors trying to make some money so that we can retire early, or plan for the future, etc.
How many of us have actually tracked our risk adjusted returns on our portfolio vs the benchmark?
Sharpe ratio anyone?
The thing is... actually, what's important for me, (or whoever), is pretty much... is the returns good enough for my/your objective?
If I invest $500k, my annual expenses is $25k, and maybe I don't expect inflation to increase my expenses by much every year, cos inflation doesn't affect every product equally.
So I require a 5% return on my investments.
If I look at my scenario above, where I made 15% return over 5 years, then I have failed.
Even if I made 23%, which is above the benchmark, I would deemed to have failed.
The thing is, actually, a lot of us are influenced by a lot of what the financial industry is doing.
Benchmarks, inflation, different allocations, whatever.
But we aren't measured the same way as the financial industry.
Most of us are just simple individuals trying to make our money last longer and be financially independent.
IF I had $10million, I just need a 2% average return annually and I would get $200,000, more than enough to survive forever.
That's enough for me to "win".
Doesn't really matter what the S&P or whatever arbitrary benchmark is performing.
Many of us tend to look at our portfolios against some other benchmark.
As I continue on this retirement journey, I find out that... it's really not important.
As long as I have a comfortable place to stay, good enough food to eat, enough clothes to wear.
That's good enough for me.
Lose money is really negative returns over the long run. That's really lose money.
Anything else... is pretty ok as long as returns cover my expenses in the long run.
Don't need to think so much about comparing against benchmark or what.
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