Investment Help

If you are seeking investment help, look at the video here on my services. If you are seeking a different approach to managing your assets, you have landed at the right spot. I am a fee-only advisor registered in the State of Maryland, charge less than half the going rate for investment management, and seek to teach individuals how to manage their own assets using low-cost indexed exchange traded funds. Please call or email me if interested in further details. My website is at If you are new to investing, take a look at the "DIY Investor Newbie" posts here by typing "newbie" in the search box above to the left. These take you through the basics of what you need to know in getting started on doing your own investing.

Wednesday, November 21, 2012

How Are Your Investments Performing?

One of my pet peeves is that most investors have no idea how their investment portfolio is performing on an absolute basis.

Most of the time when I ask people, I get a puzzled look and a response that suggests they'll know when they get their quarterly report in the mail.  Of course, the quarterly report will typically be at least a week old.

Sometimes people respond by saying they are doing great - their portfolio is up by $4,320 this quarter.  This, of course, is meaningless--in that it is great if they have a portfolio valued at $140,000 but not so much if they have a $1.0 million portfolio and it depends on how the markets have performed.

Furthermore, it begs the question of performance relative to a simple benchmark.

My frustration comes after years of fighting to get performance data even in managing assets for institutions, such as pension funds, not to mention individuals.

Thus, today when performance is readily available, I find it difficult to understand that investors do not actively seek it out.  In fact, it doesn't even seem to be that important to the investment community itself. This shows up when financial publications do their surveys to report on the top brokers.  These surveys, at least the ones I read, never report on whether brokers report performance and performance relative to a benchmark.  Instead they are concerned with commissions and quality of research and various aspects that concern active traders.  Typically, not even a mention of performance reporting.

Take a look at the present market.  Europe is walking the edge of a gurgling volcano, the U.S. is wily coyote suspended in air after running off a cliff, and the U.S. employment picture is the "Little Engine That Could" chugging up the hill.  Volatility is rearing its ugly head.  How are your investments performing?

One broker that I know of - Charles Schwab - provides performance reporting on a timely basis, on-line, and compares performance to a benchmark based on the client's pre-selected asset allocation model.  I know this is a mouthful, but this is what it looks like:

Source: Schwab
CLICK IMAGE TO ENLARGE Note the information available to the client.  It includes beginning value, ending value, dividends earned, and change in value of the portfolio.  Most importantly, it includes the return on the portfolio (last two lines) for various time periods as well as a return on a benchmark.

The benchmark here is for the "Moderate" portfolio allocation model.  Schwab offers 7 different models for the client to choose from.

Here is what the benchmark is comprised of:

Moderate benchmark was composed of 5% Citigroup 3 month US T Bill (Cash Investments), 35% S&P 500 (Large Cap Equity), 35% Barclays Aggregate Bond (Fixed Income), 15% MSCI EAFE (International Equity), 10% Russell 2000 (Small Cap Equity). Source: Schwab.
Basically this is a 60% stocks/40% fixed income allocation.  Appropriate, typically, for someone who has just retired and who can take a bit of volatility.  For these clients, any performance exceeding 7% is usually pure gravy.

It is important to note that Schwab enables a client to combine accounts or look at accounts separately. Also, the periods examined can be customized--meaning that you can see performance between any two dates of your choosing.

All of this is by no means meant to argue that an investor should become obsessed with performance and check it too frequently.  It is important, though, I believe, to know it is readily available when you need it.  In fact, I believe it is critical to the whole investment process.

Disclosure:  I am not affiliated with Schwab although I do encourage my clients to use them.  Past performance is not indicative of future performance.


  1. Investment Performance is something that only time will tell. What happens in a year means very little its luck mostly but what happens to your investments over decades is indeed something else be it good or bad.

  2. Absolutely right! The model here actually more than quadrupled investors' money over the past 20 years! That's what is important. Those who have done less over that period have basically funded Wall Street's excesses. Sadly, many don't even know it!