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PETER DOLEZAL: Tracking portfolio performance

Few investors are knowledgeable about their portfolios’ ongoing performance, relative to meaningful and comparable benchmarks

Few investors are knowledgeable about their portfolios’ ongoing performance, relative to meaningful and comparable benchmarks. Better investment houses do provide statements with such pertinent performance information. Unfortunately, they are a minority.

Statements should routinely include information on the investor’s total return, not only year-to-date, but also for the past 12 months, for five years and since date of inception of the portfolio. Such information will allow at least broad comparisons against relevant index performance, thus giving the investor a good reference point for assessing the relative performance of his or her investments.

An example: If today you have a Non-Registered portfolio which, for tax reasons, is invested primarily in Canadian equities, it is useful to compare your portfolio performance to that of the broad TSX Index. As of February 28, 2014, the TSX Index had delivered the following total annual investment returns: 1 year – 14.34%; 3 years - 3.18%; 5 years - 15.14%; 10 years – 7.73%.

How did your portfolio compare, particularly over longer time frames like five and 10 year periods? Clearly, this is a useful comparison, helping an investor relax in the knowledge that he or she is on the right track – or alternately, suggesting that perhaps adjusting the current investing strategy might be appropriate.

If the financial house holding your investments does not provide a statement which includes both the shorter and longer-term total annual performance of your various portfolios, call your advisor at least annually and ask him to provide it. The information is easily available at the simple click of his computer mouse. In fact, it makes one wonder why such information is not routinely supplied by all financial houses.

Many investors, leaving the details to their advisor, are happy to see their portfolio values tracking upward over time. Seemingly, they do not miss having the specific performance information that allows meaningful assessment of their portfolio performance against comparable benchmarks.

Little do they realize that by being able to make such comparisons over longer-term time frames, investors can better judge the actual performance of their portfolio against broader market returns.

You, the investor, are paying fees to your investment house, whether in the form of trading commissions, advisor fees, or fund management expense ratios. You have the right to expect periodic and meaningful performance data on each of your portfolios. If you do not routinely receive it, request it, at least once annually.

 

A retired corporate executive, enjoying post-retirement as an independent Financial Consultant (www.dolezalconsultants.ca), Peter Dolezal is the author of three books, including his most recent, The SMART CANADIAN WEALTH-BUILDER.