Putting Your Performance into Perspective

We believe that there are a few things to consider to help you answer the question "How am I doing?"

First, set your expectations

Reviewing your investment performance over time is important to help determine if you’re on track to achieve your financial goals. But before you can evaluate performance, you first need to determine the return you are trying to achieve – which is really the return you need to help achieve your goals.

To help put your investment performance into perspective, your return expectations should be:

  • Relevant – base your expectations on the goals you've set for yourself and your family
  • Realistic – the type of investments you own, your comfort level with risk, the market environment and your investment time horizon are all factors in how your portfolio will perform
  • Reviewed – evaluate your return expectations over time to ensure they align with the return you need to meet your investing goals

Next, find out where you are today

We know you want to stay informed about how your investment accounts are doing. In addition to regular reviews with your financial advisor, accessing your account information online is a key tool for keeping up-to-date on the status and performance of your Edward Jones accounts.

How is your personal rate of return calculated?

To calculate your personal rate of return, we use the industry-defined "dollar-weighted" calculation that factors in the performance of your investments and the timing of your additions and withdrawals as well as any dividends, interest or capital gains distributions the investment pays.

What affects your personal rate of return other than investment performance?

Amount Added/Withdrawn - The net amount you've added to or withdrawn from the account during a particular period. This includes transfers in/out, cash added/withdrawn, any fees or commissions charged, and taxes withheld.

Investment Cash Flows - Net total of all cash flows for a specific investment, including buys/sells, transfers in/out, dividend/interest payments, and dividend reinvestments.

Example:

You buy XYZ stock for $1,000 on January 2 and then buy $500 more on February 1. XYZ stock then pays $50 in dividends, which you do not reinvest. On March 1, you sell $300 of XYZ stock. Your net Investment Cash Flows will show as $1150 ($1,000 + $500 - $50 - $300).

If you had reinvested the dividends, the total amount would increase:

Net investment cash flows would be $1200 ($1000 + $500 - $50 + $50 - $300).

How your personal rate of return is calculated

Here's an example:

Within one year, both John and Jane deposit and invest $1,000 and achieve a $100 gain, each ending the year with $1,100.

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*Source Edward Jones. Because there were no additional investments or withdrawals, his personal rate of return is identical to the dollar-change percentage, 10%

FAP-9937-chart-right

*Source Edward Jones. Her rate of return is higher because half of her deposit was not invested until July, which means her investments had to perform better to achieve that same $100 growth.

What is the time frame used to calculate your personal rate of return?

Edward Jones tracks the performance of your investments since they have been held in the current account, but no earlier than Jan. 1, 2009. This also includes investments you owned during this time period but have since sold. Certain events, including a transfer of an investment between accounts, share class conversion, or change in an investment's identification code (CUSIP) caused by a corporate action, will impact the time frame over which the investment's rate of return is calculated.

What is an annualized rate of return?

Your annualized rate of return reflects the average annual return of your portfolio since its inception. For example, if you invested $100 five years ago, reinvested all dividends and capital gains, and it is now worth $200, your holding period return would be 100% with an annualized return of 14.87%. (Simple math may lead you to divide 100% by 5 years to get a 20% return per year, but this would not be an accurate annualized return because of compounding. Compounding occurs because you reinvested the money earned in year 1, allowing that money to grow in year 2 along with your initial $100 investment.)

What is your total return?

This includes increases or decreases in market value, dividend and interest income received, capital gains distributions, accrued interest income earned but not yet received, minus fees associated with Edward Jones advisory programs and other account maintenance fees.

How can you find out how a specific investment is doing?

When evaluating a specific investment you own, there are multiple factors to consider. We believe you should consider not just an investment’s current value, but also:

  1. Purpose of the investment in your portfolio (current income, growth potential, etc.)

  2. Outlook for the investment, including the Edward Jones research opinion, which offers our perspective on the potential attractiveness of a security

    Edward Jones Research Opinion Ratings:

    • Buy: We believe the valuation is attractive and total return potential is above average over the next 3–5 years compared with industry peers.
    • Hold: We believe the stock is fairly valued and total return potential is about average over the next 3–5 years compared with industry peers or a special situation exists (such as a merger) that warrants no action.
    • Sell: We believe the stock is overvalued and total return potential is below average over the next 3–5 years compared with industry peers. In some cases, we expect fundamentals to deteriorate considerably and/or a recovery is highly uncertain.
    • Under Review: Our rating, estimates and opinion for the investment are under review and should not be relied upon for making investment decisions until updated.
    • FYI: The research document is for informational purposes only. It provides factual information rather than an opinion.
  3. Investment’s return over time

    The long-term average annual return of the investment provides a better indication of how an investment is performing than short-term performance.

  4. Your cost basis, which can help you better understand your possible taxable gain or loss if you sell the investment

Then, understand the reasons behind your performance

There are plenty of reasons why your portfolio is performing the way it is – the market environment, the mix of investments you own (or even certain investments themselves), how long you've held your investments – or more likely, a combination of these factors.

In any case, talk with your financial advisor. He or she can help you connect what’s happening in the market – and even in your life – to your portfolio.

For timely information on the market and investing, see our Market News & Guidance section.

The challenges of comparing your performance to a market index

Though market indexes can provide insight into the general performance of stocks and bonds overall, they are usually not a relevant comparison to your own portfolio's performance. Why?

  1. A market index is not based on your goals or your tolerance for risk. If your goal were to produce income for retirement, you’d likely allocate a larger portion to fixed income. Therefore, it wouldn’t be appropriate to compare your returns to those of a stock index, such as the S&P 500.
  2. Indexes are generally not diversified across different types of investments. This means they often can have wider swings in value. And to realize the extreme highs of an index, you must also be willing to accept the extreme lows.
  3. Your performance will be affected by your contributions and withdrawals, while the published market returns aren’t. There are also expenses and fees with investing, and the index performance typically does not include these costs.

Stay up-to-date

We recommend reviewing your goals and objectives with your financial advisor at least once a year, as well as when there are changes to your personal situation.

Your financial advisor can help you review your current performance in the context of your long-term goals and our expectations for future performance. More importantly, you’ll review how that performance affects your progress toward your long-term goals and if any changes need to be made to keep you (or put you back) on track.

Important Information:

Past performance is not a guarantee of future results.

Investors should understand the risks involved of owning investments, including interest rate risk, credit risk and market risk. The value of investments fluctuates and investors can lose some or all of their principal.

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