Posted on December 30, 2010

Managing an investment portfolio is in many ways is no different than managing a company. If you want your investments to better performance, we must measure how well you do. If you do business without measuring the growth of profits and assets, or what has contributed to a decrease in the growth, you will not have enough information to know when and how things should be changed soImproving Performance. Exactly the same principle applies to the management of investment portfolios.

If you are an investor and speculator, not as your goal will be to optimize the performance over a period of time, say 5-10 years. The investment time frame is over when you move the capital, not to the point, if you need income from your portfolio, so even if you retire, you are still a long-term investors, at least for part of yourPortfolio. The total return on your portfolio is the sum of income distributions from the portfolio in the form of interest or dividends, and the change in portfolio value that is supported by a change in the price of investments you. This rate should be based on quarterly measured. If you invest the portfolio in part in active growth, such as shares, so their value up and down over time some years a good performance and a couple of years will bea negative return. A portfolio consisting exclusively of fixed income investments should have a consistently positive performance. However, risk and return go together and as an investor must choose between building a portfolio to achieve uniformity, but low efficiency and a more volatile portfolio produced a return variable in the short term high yield, but in the long term.

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If your portfolio includes the activities of growth, does not make the mistake of comparing performance from year to yeara portfolio of fixed interest, as this is done to compare apples and oranges. There is certainly a volatile portfolio there will always be a few years, when a fixed income portfolio would have done better. The problem is that we only know with hindsight, the years in which applied. For a year, the average growth rate of portfolio return for the investment term, you should not focus on the year to come back.

In the short term, thePerformance of each asset class in the portfolio should be relevant to the market index that the asset class are compared. Your goal is to do better than the market. If your stock portfolio declined in value by 5%, but the indexs market share fell by 15%, is good with your actions. In the long term, overall goal should be to produce an average of better return after taxes and fees and would have been obtained by putting the money in the bank. With a well-diversified portfolio, assets have to invest more in growth and the longer your investment period, the higher the return is likely.

How to measure portfolio performance