Southbourne Group Singapore, Tokyo Japan Evaluating Your Investment Returns

Southbourne Group
Investment Returns
Singapore,
Tokyo
Japan
on
Evaluating
Your
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, 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 accuracy. Great patience is,
therefore, of utmost importance in order to succeed as an investor. There are no short-cuts in this industry.
A Suitable Benchmark
A common pitfall among investors is the tendency to compare apples and oranges.
A prime example is that of a company whose primary approach is to have a mix of bonds and stocks allocated through ETFs that are
adjusted according to meticulously-developed strategies. As such, it has a total of 20 to 40% stocks and 50 to 70% bonds in the Strategic
Income Portfolio at any particular period.