How do I Evaluate Investment Performance?

Malcolm Tatum

Staying on top of the performance of the investments in your portfolio or a retirement fund is important if you want to build a secure financial future. Key to maximizing the return on your investment is the ability to assess current investment performance and determine if it is acceptable. Here are some tips on how to perform this type of assessment and make sure your investment portfolio is where you want it to be.

The key to maximizing a return on an investment is the ability to assess current investment performance.
The key to maximizing a return on an investment is the ability to assess current investment performance.

Regular review of each investment in the portfolio or retirement fund is essential. Unfortunately, far too many investors do not perform a review on anything other than a casual basis. Instead, they wait until they receive a statement on the status of a 401(k) or quarterly reports that provide an overview of how each of the stocks they own performed since the last report. If you really want to understand the investment performance of your holdings, make it a point to go over their activity at least once a month. This will give you the chance to make changes in a more proactive manner and possibly increase your return.

A financial advisor can give advice to investors on where to invest or which trends to watch for.
A financial advisor can give advice to investors on where to invest or which trends to watch for.

Along with setting up a regular schedule to conduct a review of the performance of your investments, it is important to identify some outside resources to use as benchmarks for the growth or decline associated with each of your holdings. Choose companies that are in the same industry and compare performance levels to those industry leaders. If the pattern of growth of your investments is similar to the trend of the benchmark, then chances are you should hold on to the stock. If not, it is time to make some changes.

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Don’t be afraid to set your own standards for investment performance. If you choose to invest in a given stock and project it to result in a certain amount of dividends over the next calendar year, make sure the return is headed in that direction. For any stock or commodity that is not performing up to your standards, sell it off and buy something else. Investing is about making enough money to help you reach your goals. Holdings that do not perform up to expectations should be replaced by investments that will help you reach your goals.

No matter how well you know the market, never think that you cannot benefit from the counsel of a financial advisor. Advisors often see details that investors overlook. A good financial advisor can help you be more proficient with your retirement fund management, alert you to upcoming changes in the stock market, and also advise you of other financial markets that may be worth your attention. The advisor may also have a few suggestions on how to evaluate investment performance that are of particular relevance to the holdings in your portfolio.

When it comes to finances of any kind, paying close attention to trends and general performance is very important. This is especially true with investment performance. If you do not currently have a regular schedule to evaluate the holdings in your portfolio and retirement fund, establish one today. This simple action could make a huge difference in the level of financial security you enjoy in the years to come.

Discussion Comments


Investment Portfolio Protection Strategy

A participant in the morning Working Capital Model (WCM) investment workshop observed: I've noticed that my account balances are returning to their (June 2007) levels. People are talking down the economy and the dollar. Is there any preemptive action I need to take?

An afternoon workshop attendee spoke of a similar predicament, but cautioned that (with new high market value levels approaching) a repeat of the June 2007 through early March 2009 correction must be avoided--- a portfolio protection plan is essential!

What are they missing?

These investors are taking pretty much for granted the fact that their investment portfolios had more than merely survived the most severe correction in financial market history. They had recouped all of their market value, and maintained their cash flow to boot.

Their preemptive portfolio protection plan was already in place --- and it worked amazingly well, as it certainly should for anyone who follows the general principles and disciplined strategies of the WCM.

But instead of patting themselves on the back for their proper preparation and positioning, here they were, lamenting the possibility of the next dip in securities' prices. Corrections, big and small, are a simple fact of investment life whose origination point, unfortunately, can only be identified using rear view mirrors.

Investors constantly focus on the event instead of the opportunity that the event represents. Being retrospective instead of hindsightful helps us learn from our experiences. The length, depth, and scope of the financial crisis correction were unknowns in mid-2007. The parameters of the current advance are just as much of a mystery--- today.

The WCM forces us to prepare for cyclical oscillations by requiring: (a) that we take reasonable profits quickly whenever they are available, (b) that we maintain our "cost-based" asset allocation formula using long-term (like retirement, Bunky) goals, and that we slowly move into new opportunities only after downturns that the "conventional wisdom" identifies as correction level--- i. e., twenty percent.

So, a better question, concern, or observation during a rally (Yes, Virginia, seven consecutive months to the upside is a rally.), given the extraordinary performance scenario that these investors acknowledge, would be: What can I do to take advantage of the market cycle even more effectively--- the next time?

The answer is as practically simple as it is emotionally difficult. You need to add to portfolios during precipitous or long term market downturns to take advantage of lower prices--- just as you would do in every other aspect of your life. You need first to establish new positions, and then to add to old ones that continue to live up to WCM quality standards.

For the rest of the article, just Google the Title

Steve Selengut

sanserve (at)

Kiawah Golf Investment Seminars

Author of: "The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read", and "A Millionaire's Secret Investment Strategy"

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