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The question may appear simple at first but I really cannot come up with a quick and easy way to compare my performance as a trader Vs S&P500. For the sake of simplicity, I am analyzing my portfolio value on a monthly statement basis instead of daily. I buy and sell stocks and my investment portfolio value may go up or down based on how much I have invested for that month. Now I want to translate this portfolio performance into a simple YTD profit percentage so that I can compare that with that of S&P500. The important thing to consider is that I am not making all of my investment at once at the beginning of the year, but I want a metric that gives me an equivalent % if I had invested all of it at beginning of the year and have the cumulative profit at the end of the year.

Month       Invested
January 
February    $500 (bought)
March       $1500 (bought)
April   
May 
June        $1000 (bought)
July    
August  
September   
October     $-2000 (sold)
November    
December    $1000 (bought)
Profit      $350

The data above shows my amounts that I invested and sold for each month in a year. These investments are not necessarily in a single stock, I buy many companies and sell that I don't like or got way too high. At the end of the year I had a profit of $350. How do I now say that for the year I had x% profit so that I can compare that with S&P500 for that year?

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    I'm assuming the amounts 500, 1500, 1000, etc. are numbers of shares, but then 350 is dollars. What is the amount of dollars you had at the beginning of the year to invest with? – BrenBarn Jul 19 '18 at 7:13
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    It is very unclear what you are actually doing, are you buying and selling the same stock or different stocks? – Victor Jul 19 '18 at 10:37
  • There isn't a "quick and easy way to compare my performance as a trader vs S&P500" when you have multiple positions and a variable amount of money invested. Here are two links that might give you a little insight into this. 1) investopedia.com/articles/basics/10/… and 2) investopedia.com/terms/c/cagr.asp – Bob Baerker Jul 19 '18 at 12:25
  • I hope that the edits have made the question better to understand. – Cool_Coder Jul 20 '18 at 2:41
  • Is your $350 "profit" taking into account the unrealized gains and/or losses on any shares you still hold? – BrenBarn Jul 20 '18 at 3:02
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To compare your performance with the S&P 500, I think you have to work out what you would have got at the end of the year if you had simply invested everything in the S&P 500 at the time you invested it in your portfolio (simply looking at "what the S&P 500 did" over the year is not, I think, the right thing to do).

This randomly-found site, gives historic prices for the S&P 500. Since you've given a whole year of figures, I've used the prices from 2017 and assumed you invested the amounts shown on the first of each month. The following table shows how many "nominal shares" in the S&P 500 you could have bought each month and their value as at 1st January this year (prices are to nearest $; number-of-shares to 3dp):

Month       Invested   S&P 500 Price  Nominal Shares
---------   --------   -------------  --------------
February         500           2,330           0.215
March          1,500           2,367           0.634
June           1,000           2,434           0.411
December       1,000           2,664           0.375
              ------                          ------
Total          4,000       Total "Shares"      1.635

               S&P 500 as at 1st Jan 2018      2,790
                 Value as at 1st Jan 2018      4,560
                        Profit (on 4,000)        560 or 14%

Note: I have not included the sale from your portfolio because you said you sell when you either no longer like a stock, or the price is high-enough to warrant realising gains. I think the correct way to compare your strategy with investing in the S&P 500 is to assume you left all monies invested.

(If you had sold $2,000 of your investment in October (either because you needed some "ready money", or because you thought the S&P's performance warranted selling), then: the S&P price on Oct 1st was $2,557 so you would have had to sell 0.782 "shares" to extract $2,000. This would have left a total of 0.852 shares worth $2,378 on Jan 1st 2018, for a profit of $378 or 9.45%).


How does this compare with your strategy? It depends on whether your situation matches what I think your figures are saying or not...

If I take your figures at face value, it appears that you've done considerably better than the S&P 500 – perhaps too much better, which is why I have some doubts whether what you mean by them matches what I think they mean.

  • If the $350 is the "paper profit" on your portfolio at the end of the year (that is, the value of your remaining shares as at Jan 1st less whatever you paid for them), and you extracted $2,000 from that portfolio during the year, then it would seem you made a total profit of $2,350, or a very welcome 59% profit.

  • If the $1,000 you invested in December was part of the $2,000 extracted in October, and not "new money", then you're still well ahead of the S&P 500, but not as dramatically: your profit would have been $1,350 or 34% – over double the S&P.

  • If the $350 is actually your total profit, including the $2,000 you extracted, then your profit would simply be $350 or 9% (very slightly below the figure if you had invested everything in the S&P and liquidated $2,000; a little under two-thirds of what you would have got if you'd left everything in the S&P 500).

  • Thank you for your detailed answer Tripe. First, the numbers I posted are totally made up, you don't expect me to publicly post my actual numbers do you (I did better than what I posted) ;). Second, the answer that you posted had run through my mind but I was hoping that there would be a better solution. This is because I want to compare my performance with a common standard for every other person. Also, you are partially normalizing my market timing by this method. Yet, I will still accept your answer as the best possible one for this problem. – Cool_Coder Jul 21 '18 at 2:38
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You could look at the total amount of money you had available for investment at the beginning of the year, and compare your performance to what would have happened had you put it all in the S&P 500 at the beginning of the year.

In your example, although you only bought 500 shares in February, you still had enough money to buy 1500 more in March and 1000 more in June. That means in February you had enough money to buy more than what you actually spent. You effectively made a choice to "invest" some of it in cash rather than buying into the S&P 500 (or buying more of whatever shares you did buy). So you can compare your return with what you would have gotten had you invested everything into the S&P 500 right at the beginning.

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    I don't think you can assume the OP had left-over money in February, just because they invested more in March/June (by that logic, they "must" have had even more "left-over" money in April/May) – it may be they have variable income, or variable expenses and the amounts above are just "what was left over". I would have thought a better method would be to record how many "nominal shares" in the S&P500 you would have got on each of the days the OP invested in their own shares and compare what the end-of-year value of those "nominal shares" would have been against their portfolio. – TripeHound Jul 19 '18 at 7:57
  • @TripeHound: Yes, I am assuming that they did have even more left over in April/May. If they are investing every penny of their incoming cash flow then they could do what you describe, calculating the S&P buy-ins on a monthly rather than annual basis. My main point is just that if, at any time, they have money that they could have invested but didn't, they need to recognize that they are thereby "investing" it as cash and should compare that to investing it in the S&P. – BrenBarn Jul 19 '18 at 17:45
  • Bren this method would not be appropriate. The cash I had in March was not available for me to invest in January. I should only be assessed on what I invested. – Cool_Coder Jul 20 '18 at 2:42

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