Bellmore Group Management Services, Tokyo Japan Evaluating Your Investment Returns

Bellmore Group Management Services on Evaluating Your
Investment Returns
According to David Fabian, “A vital part of
Investment success depends upon one’s ability to
compare historical returns with an index or
benchmark.
Doing so will let you measure if your approach
meets the performance expectations or evaluate
the efficiency of somebody else’s recommendation
prior to hiring them. Although is may be very
common in the entire industry, many investors
still make knee-jerk conclusions based on
unreliable or biased information.
Two primary conditions that must be satisfied
when determining the viability of any investment
approach are discussed below:
A proper standard of evaluation
We now lay down the reasons why these concepts are essential to your decision process.
Let us talk about time.
In reality, time is a commodity that has lost its overarching value in the fast-evolving dynamics of our daily existence.
People so often fall prey to the temptation of immediate gratification provided by modern technology that they totally
overlook how much time is required to accumulate wealth through the process of compounding.
For instance, if you start saving and investing starting at your mid-20’s and then you retire in your mid-60’s; it would have
taken you 40 years to accumulate your wealth. But it does not end there. You need to sustain your wealth’s security for
another 20 years through managing and conserving your investable assets. The growth period alone will take 480 months
or 40 years, while the distribution or income period could last for 240 months or 20 years more. You need enough
patience to see it through.
You cannot simply compare returns over very short time-durations. That is why you can hear people cry: My portfolio has
been stagnant in four months! I’m below the benchmark on a 6-month rack record! Alas, my portfolio is 250 basis points
lagging from the S&P 500 this year – I am done for!
The truth is that even the most efficient investment method will suffer some setbacks through underperformance. It may
take some months or even last for a couple of years or more at a time. The best step to take during such doubt-filled or
self-pitying moments is to recall why you chose this strategy in the first place.
Is your investment strategy still consistent with your risk tolerance level?
Could there be an intervening and temporary factor that is causing the adverse conditions?
Can you do something to manage this factor in order to enhance your long-term returns?
Have you really considered the risks of shifting to another approach in mid-stream?
Experts would advise that you analyze the performance of any investment method over a period of 3 to 5 years, enough
time to determine the strengths and weaknesses over several conditions of the markets (bear, bull, transitional, and
others).
The bond or stock markets can proceed for a few years along a particular direction. While that may favor some investors, it
can also hurt others. Not that either side is bad investing; it all has to do with each group being exposed to different risks.
Creating and protecting your wealth is not a 100-meter dash -- a short-distance race, so to speak. Rather, it is a marathon -
- a sustained race where risk conditions must be considered at close-range and behavioral principles applied with