How We Calculate Performance

The past performance of your allocation, the S&P 500 index and the target allocation is calculated using the historic market data from the various holdings. The performance of each holding is calculated using the monthly returns from each holding where possible. All historic returns for these holdings are inclusive of the annual fees charged on these holdings.

For the target allocation, in the case where a holding does not have 15 years of data, we use the historic performance data from a close alternative/proxy holding to get the required 15 years’ worth of data. The returns for the close alternative/proxy holding are inclusive of the holdings historic annual fees.

For your current allocation, in the case where a holding does not have 15 years of data, we use data from a broad-based index tracking fund with the same broad asset class we have matched the holding to. As we are using an index fund as a proxy for the historic returns, these returns are inclusive of the historic annual fund fees for the index fund. The use of proxy data is explained in more detail below.

For the S&P 500 index we have used performance data from the SPDR S&P 500 ETF (SPY).

We generate the historical performance of holdings using the current percentage allocation of your portfolio as it is today, for the following reasons:

  • When we read the holdings from your account through account aggregation, we can only see what you hold today, not what you have held over the last fifteen years.
  • We can’t assume how long you may have been investing or how your holdings may have changed over the past 15 years.

Furthermore the calculation reflects:

  • Annual rebalancing of both allocations
  • No transaction fees
  • No taxes
  • Reinvestment of dividends and other earnings

The performance data used in the back-tested calculation of your current allocation

If historic data is available for a holding, it is used in the historic performance. If a holding hasn’t been in existence for 15 years or if no public performance data is available then historic performance for the holding is sourced from a broad asset class that is related to the holding’s asset class categorization. For example, as of July 2015:

If you currently hold a percentage of your portfolio in the ETF SPY (SPDR S&P 500 ETF): the ETF SPY has 15 years’ worth of data and the data is publically available therefore we will use the performance data from SPY in the target allocation portfolio’s back-tested performance. However, if you currently hold a percentage of your portfolio in VTV (Vanguard Value ETF): the ETF VTV does not have a full 15 years of performance data as it has only been in existence since 01/26/2004. In order to retrieve a full 15 years’ worth of historic data for the holding we will use performance data from a broad based index fund that matches the broad asset class categorization of VTV to fill in any of the “missing” data. In the case of VTV, which has the broad asset class categorization of US Large Cap Stock, we would make use of the performance data of an investable index fund that tracks an index of US Large Cap Stocks such as SPY (SPDR S&P 500 ETF) to fill in any missing data on the primary ETF VTV.

The performance data used in the back-tested calculation of your target allocation

If historic data is available for a holding, it is used in the historic performance. If a holding hasn’t been in existence for 15 years or if no public performance data is available then historic performance for the holding is sourced from similar alternative/proxy holding that has the required data. For example, as of July 2015:

  • If the target allocation recommends you hold a percentage of the portfolio in the mutual fund VFINX (S&P 500 index tracking mutual fund): the mutual fund VFINX has 15 years’ worth of data and the data is publically available therefore we will use the performance data from VFINX in the target allocation portfolio’s back-tested performance.
  • However, if the target allocation recommends you hold FLVEX (Fidelity Large Cap Value Enhanced Index): the mutual fund FLVEX does not have a full 15 years of performance data as it has only been in existence since 04/19/2007. In order to retrieve a full 15 years’ worth of historic data for the holding we will use performance data from a close alternative/proxy fund to fill in any of the “missing” data. In the case of FLVEX we may make use of the performance data for the mutual fund VIVIX (Vanguard Value Index Fund Institutional Shares mutual) to fill in any missing data on the primary mutual fund FLVEX.