Wealth Added Index (WAI)

The Wealth Added Index (WAI) is a measure of the performance of an investment portfolio relative to its benchmark. It is calculated by taking the difference between the portfolio's return and the benchmark's return, and then dividing that difference by the benchmark's return. The WAI can be used to compare the performance of different portfolios, or to track the performance of a single portfolio over time.

The WAI is a useful tool for investors because it provides a more comprehensive measure of performance than simply looking at the portfolio's return. The benchmark return takes into account the risk of the portfolio, so the WAI can be used to compare portfolios of different risk levels. Additionally, the WAI can be used to track the performance of a portfolio over time, even if the benchmark changes.

The WAI is calculated using the following formula:

```
WAI = (Portfolio Return - Benchmark Return) / Benchmark Return
```

where:

* Portfolio Return is the return of the portfolio being evaluated.
* Benchmark Return is the return of the benchmark portfolio.

The WAI can be positive or negative. A positive WAI indicates that the portfolio has outperformed the benchmark, while a negative WAI indicates that the portfolio has underperformed the benchmark.

The WAI is a useful tool for investors, but it is important to note that it is not without its limitations. One limitation of the WAI is that it does not take into account the costs of investing, such as commissions and fees. Additionally, the WAI can be misleading if the benchmark portfolio is not appropriate for the investor's risk tolerance.

Despite these limitations, the WAI is a valuable tool for investors who want to measure the performance of their portfolios relative to a benchmark. The WAI can be used to compare different portfolios, track the performance of a single portfolio over time, and make informed investment decisions.