When it comes to managing their money, people mostly want to keep track of two main things: “What’ve I got?” and “How’s it doing so far?” For that, one or two periodic reports should suffice. In fact, too many detailed financial reports, viewed too often, can be like staring at the sun. Too intense and bad for your financial health!

In my last “No Dumb Questions,” I covered what one good report might look like to address your “What’ve I got?” queries. A somewhat more robust, semi-annual Performance Report can also be an effective ruler to replace vague guesstimates with more accurate assessments on whether your investments are measuring up to expectations.

What does a performance report look like?

Would you like to see what a portfolio performance report might look like, and how to make the most of it? That’s what my next couple of “No Dumb Questions” are about! And if you’re enjoying our enlightened insights so far, I hope you’ll take the shine to the idea of signing up to future segments. If you’re watching my videos from YouTube click on that bell, or if you’re on LinkedIn feel free to give me a follow like this.

If you took in much of the news this summer foreshadowing the solar eclipse, you learned quickly how damaging it can be to stare directly at the sun. So we all know to avoid blinding ourselves by not ‘sun-gazing’.

So it goes with tracking your investments. Most investors are best off enjoying the light that a few decent reports can shed on their financial view without being blinded by information overload.
Frequency matters too. The one-page Client Review [link to last video] I discussed in my last “No Dumb Questions” video is great for a month-or-so glimpse at what you’ve got. It pairs well with a semi-annual-or-so Performance Report to help you assess accurately whether you’re staying on track toward your investment goals – like the kind I talked about here.

While good fortune is shining on us, because I happen to have just such a report to show you. It’s the one we produce for our clients here at PWL and it’s a good example for what you’ll want to look for.

Our Performance Report starts with a one-page overview that’s similar to that in the Client Review I already covered. You can revisit my last video for more details, but remember to consider investment gains and losses AND contributions or withdrawals you’ve made when considering how much your total wealth has changed from one period to the next. Obviously, if you took out $100K for home renovations, you can’t blame the market if your portfolio has gone down by that amount!

Our Client Review and Portfolio Performance reports both consolidate a family’s piles of account statements into a quick-take view of all their portfolios and how their portfolio is divided among their accounts and across different kinds of investments, or “asset classes.”

That’s nice to know. But it still doesn’t capture how well your investments are helping you actually achieve your investment goals. That’s where the “Investment Performance” section of this report comes in handy, especially the one-page roll-up. On that summary page, our clients can see several things at a glance.

First, they can see the grand total of what everything in their portfolio has returned annually across the near- and the long-term. So, whether they’d like to know how their portfolio has done so far this year, or how it’s fared on average since we first set it up, that’s info that’s there at a glance. These returns are after fees and transaction costs, so they’re more realistically diminished by the costs involved in earning them.

We also show how volatile those annual returns have been from one year to the next, as the market moves through its never-ending mood swings.

To illustrate, let’s say in some fantasy-land market, your portfolio returned 5% every year – year in and year out – What’s your average annual return? Well 5%, right? Now, let’s say your actual portfolio also averaged 5% annually across five years, but it did so by delivering these far more believable results:

  • Year 1: +1%
  • Year 2: +6%
  • Year 3: +12%
  • Year 4: –8%
  • Year 5: +14%

If you do the math, that’s still 5% on average. But imagine the temptations you might have, especially after Year 1 and Year 4 to reconsider your approach. The moral of the story is, it’s worth managing both your expected returns as well as the “mood swings” you may have in tolerating to achieve them.

All this speaks to why it also can be handy to see how the various pieces and parts that make up your whole portfolio are performing “à la carte.” What we care the most about is your bottom line returns. But as discussed here, some asset classes are expected to be more or less volatile, with higher or lower expected returns over time. It can help to see whether each part is playing its appropriate role within your whole Portfolio.

Last but not least, I want to touch on an important twist to this plot. “How am I doing?” is not as easily answered as you might think … at least not without also considering the essential related matter: “Compared to what???”

That question takes more than a few sentences to properly explore, so I’m going to save it for my next “No Dumb Questions” video. I’m Nancy Graham, and I’d love to let you know just as soon as that’s ready for your viewing pleasure, so be sure to subscribe, click on the bell or follow my page on LinkedIn!