If you check out the numbers at the bottom of last night's story, it looks as though the Rule Maker Portfolio is trailing the S&P 500.

Since inception in February 1998, the Rule Maker is up 41.7% and the S&P 500 is up 48.7%. On an annualized basis, which just provides a yearly breakdown of returns, the Rule Maker has returned 14.1% annually compared to 16.1% for the S&P 500.

What gives?

First, a Rule Maker confession. On September 9, we at The Motley Fool rolled out a new version of our portfolio tracking tool. The good news is that the upgrade has very useful new features. For example, it gives readers the ability to compare their own portfolio with benchmarks such as the S&P 500, the Rule Maker, or Rule Breaker.

The bad news is that when we rolled out the upgrade we accidentally used a different accounting method for crunching returns. In a nutshell, we used the Value Per Share method rather than the Overall Return method -- the one we have historically used.

(By the way, there's not one standard method when it comes to tracking portfolio returns. There are several and we have tried to pick the ones that best reflect economic reality. Some portfolios and funds use the Internal Rate of Return, others use the Value Per Share, Overall Return, or Net Asset Value method.)

The upshot of all this is that the total Rule Maker return numbers are inaccurate from September 9 through September 22. They are lower than reported. Our mistake. We're pulling the numbers and replacing them with an explanation since we can't go back and recreate the tables the way they should have appeared. Again, we offer humble apologies.

Now, let's talk about comparing our returns to the S&P 500, the standard industry benchmark. When we rolled out the upgrade we also failed to include the most important benchmark we have for measuring the Rule Maker -- the results for the S&P 500 on a dollar-cost-averaged (DCA) basis. That's a mouthful, but what does it mean?

Go back to our portfolio report from September 8 and scroll down to the index returns comparison box. You'll see a row for the S&P 500 DCA reporting the total return since inception and on an annualized basis. This S&P 500 DCA set of returns is our most relevant benchmark. Here's why: If you want an apples-to-apples comparison of the S&P 500 and the Rule Maker, you have to act as though you invested fresh cash into the comparison index every time you added it to your portfolio. This DCA version of the S&P's performance is necessary not only for the Rule Maker port, but for any portfolio that dollar-cost averages via fresh cash investments over time.

Why? Consider that we add $500 of cash to our portfolio each month, which we invest in a Rule Maker. Money recently added to the port hasn't had time to earn any kind of a return, which means it's not really kosher to compare it to a benchmark with money that's been invested for more than a year. If you do, the portfolio with fresh money added will look like it's underperforming. The numbers for September 8 are correct and you can see the Rule Maker is beating the S&P 500 on a DCA basis by a wide margin -- 19.14% annualized for the Rule Maker, versus 9.36% annualized for the S&P 500 DCA. That's the number we use to benchmark our performance, bottom line.

At some point next week we'll have the S&P 500 DCA table on the site again, reported everyday as part of our standard index at the end each article.

For the purposes of today's story, however, I got our portfolio tracking team to break out the S&P 500 DCA numbers as of the market close last night. Here's how the Rule Maker stacks up: 

           Since inception   Annualized
Rule Maker      41.77%         14.05%
S&P 500 DCA     22.68%          8.01%
As you can see we still have a nice lead over the S&P 500 on a DCA basis. We're happy with these returns and happy with our strategy. It's focused, seeks out high-quality, profitable businesses, and minimizes the frictional costs of trading by eliminating churn.

However, we'd like to stress a few points about beating the market. We offer the Rule Maker Portfolio as a real-money teaching tool. It represents one method of selecting equities and one type of investment strategy. We find it a super-useful way to evaluate businesses.

It's not the only method, however, nor one that makes sense for every investor. We're not saying all your money should be invested in Rule Makers. Not by a long shot. The portfolio is two-and-a-half years old. That means it's not time tested, backtested, or scientifically proven. Two years is the blink of an eye when it comes to evaluating portfolio returns.

There will likely be years we underperform the market, perhaps for an extended period. As long as we have confidence in our investments as solid businesses, we won't fret. Over the long term -- 5, 10, 20 years -- we hope to beat the market by a few percentage points on an annual basis, and we're off to a good start, but there's no guarantee.

Put this under your hat and think about it. And have a great weekend.