How Am I Doing? A Look at Portfolio Performance

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Reviewing your investment performance is an important step in determining if you’re on track to achieve your financial goals. But how do you know what return you should be achieving? You can help put your performance into perspective by making your expectations relevant, realistic and reviewed.

Relevant

Some investors look at the S&P 500’s returns and ask why theirs are different. Though indexes can provide insight into general market performance, they’re not based on your specific allocation or designed to help you reach your individual goals.

The most important return is the one you need to reach your goal. So once you’ve set your financial goals, work with your financial advisor to determine the return you’ll need to achieve them. It’s this return, rather than the market return, that should become your “benchmark” to determine if you’re on track.

Realistic

In general, your portfolio’s return will depend on several factors, including:

  • The market environment – Our long-term return expectations are 6% to 8% for U.S. stocks and 3% to 4.5% for fixed-income returns. However, as market conditions change, these outlooks also can change.
  • Your asset allocation – Your mix of investments can be the most important factor in how your portfolio performs over time. Risk and return go hand in hand – the more you invest in stocks, the greater your chances for positive returns, but the higher the risk (or chance for higher volatility) you’ll take on.
  • Your investment holding period – The longer you own your investments, the higher the likelihood your returns will be positive. Make sure you compare your return goals to your long-term performance, not just one particular quarter or year.

Reviewed

At least once a year, you should meet with your financial advisor to conduct a thorough review of your portfolio and financial position, including your personal rate of return. Regular reviews can help determine if you’re making progress toward achieving your financial goals. Ultimately, this is the best way to measure your portfolio’s performance.

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