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How to Measure Performance of your Portfolio.

Market goes up and down. No system in the world can assure that equity linked investment will only go up. Accepting the loss without understanding long term impact is not a wise decision. So, it is important to know a methodology to measure the potential outcome in the long run. It is known secret that benchmarks (SENSEX, NIFTY) move upward in the long run and give good return on investment (Click here). So, we strongly recommend measuring the performance of your portfolio against benchmark. A good portfolio returns more profit than benchmark in upward market and less loss than benchmark in downward market. Following examples have explained the same.
ScenarioMarket DirectionPortfolio MovementNIFTY MovementPortfolio Performance
1 Upward Invested: Rs. 100000
Finally: Rs.112385
Change: +12.39%
Start: 5934
End: 6274
Change: +5.73
Good
2 Downward Invested: Rs.100000
Finally: Rs.97845
Change: -2.16%
Start: 5934
End: 5546
Change: -6.54
Good
3 Upward Invested: Rs. 100000
Finally: Rs.103380
Change: +3.38%
Start: 5934
End: 6274
Change: +5.73
Bad
4 Downward Invested: Rs.100000
Finally: Rs.85768
Change: -14.23%
Start: 5934
End: 5546
Change: -6.54
Bad
5 Upward Invested: Rs. 100000
Finally: Rs.97845
Change: -2.16%
Start: 5934
End: 6274
Change: +5.73
BadBad
6 Downward Invested: Rs.100000
Finally: Rs.103380
Change: +3.38%
Start: 5934
End: 5546
Change: -6.54
GoodGood
This methodology is NOT specific to APS. Investors can evaluate the performance of their existing strategy or recommendation service against this methodology.

External References:
http://www.kotaksecurities.com/ks/horizon-share-market-newsletter/april-16-2012/mutual-funds.html
http://articles.economictimes.indiatimes.com/2010-09-27/news/27597535_1_benchmark-mutual-funds-beta



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