The performance of your portfolio comes down to two parameters - the returns of your chosen products and whether you invested your money at the right times. However a problem with existing measures of portfolio performance is that they fail to isolate the effects of product selection and market timing.
For mutual fund investors, tracking the funds you have chosen is more important than judging your timing. This is because mutual fund investors aren't in full control of when they will receive the cash to invest in the markets. While the day of a market crash is a good day to invest, a mutual fund investor might not have the liquid assets on hand to take advantage of such opportunities. Furthermore, mutual funds are fundamentally long term investments. Your choice of products is more important than timing the market correctly.
We've built CorrectCompare™ to help you with this. CorrectCompare lets you understand the performance of the mutual funds you have chosen, while nullifying the effect of market timing. It works by calculating the XIRR that your portfolio would have received if you had made the exact same purchases and redemptions, on the exact same dates, in a benchmark index instead of your chosen products. In other words, how would your portfolio have performed if you had put all your money in the BSE Sensex?
We can then compare the XIRR of your overall portfolio to the CorrectCompare XIRR. This comparison is the most accurate metric of whether you have chosen the right funds. When you invest in mutual funds, you are paying fund managers to make investments for you. But if you're not beating the market - you are wasting your money on bad products!
You can see your portfolio's performance against that of the BSE Sensex in SimpleMoney right now, in the "Returns" tab. We'll be expanding CorrectCompare to include benchmark comparisons for each of your individual funds as well in the coming weeks!