Establishing Investment Yardstick for US and Hong Kong Market

I am firm believer of active investing (a.k.a. active portfolio management). I believe intelligent investors able to beat the investment performance of market averages over long-term, albeit they are minority. This strong belief not an idea pop-up from my head while I wake up this morning, but instead it was based on facts.

Even an intelligent investor able to beat the investment performance of market averages over long-term, the rational question come to mind is "Am I the able intelligent investor?" So, I created the following 4 lean indexes based on open market price of 1 June 2011 to measure my investment performance of US and Hong Kong Market over any reasonable period of time (with such a period including both advancing and declining markets):

US Market
Dow Jones 15

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The initial investment capital of this index is US$100,000, which invested into top 15 US companies (top 15 index components of Dow Jones Industrial Average). It's weighting is equals to 73.91% of Dow Jones Industrial Average.  Please see the corresponding spreadsheet for detail of creation of this index.

Fortune 10

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The initial investment capital of this index is US$100,000, which invested into top 10 World's Most Admired Companies published by Fortune Magazine. The idea is originated from the book titled Getting Started in Value Investing, in page 62. Please see the corresponding spreadsheet for detail of creation of this index.


Hong Kong Market
Hang Seng HK 15

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The initial investment capital of this index is HK$1,300,000 (minimum amount), which invested into top 15 Hong Kong companies (top 15 index components of Hang Seng HK 35). It's weighting is equals to 77.58% of Hang Seng HK 35. Please see the corresponding spreadsheet for detail of creation of this index.

Hang Seng Mainland 12

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The initial investment capital of this index is HK$750,000 (minimum amount), which invested into top 12 China companies listed in Hong Kong Stock Exchange (top 12 index components of Hang Seng Mainland 25). It's weighting is equals to 80.71% of Hang Seng Mainland 25. Please see the corresponding spreadsheet for detail of creation of this index. 

Annual review will be performed in January for 4 lean indexes above. Components of Dow Jones 15, Hang Seng HK 15 and Hang Seng Mainland 12 will not change unless the stock removed from the corresponding index of stock exchange, when there is any changes to weighting of the lean index components, it will based on open market price of first market day of the year. Fortune 10 will be updated annually. If Fortune Magazine published the top 10 World's Most Admired Companies of the year after the annual review, the Fortune 10 will be updated whenever the news published.

Read till this far, you may curious "Why the author take the hassle of creating his own indexes instead of just use the general indexes defined by stock exchange for his investment performance yardstick?". The motivation is simple: If being prove that my investment performance cannot beat the market average over a reasonable period, I better as well re-allocate my investment capital to these lean indexes.

I'd love to hear you comments as usual.