What are your Portfolio Performance Expectations?

by Sharon Brewer

In the story of Alice in Wonderland, Alice arrives at a fork in the road and wonders aloud which road to take. A smiling Cheshire Cat appears and asks her what her destination is, to which she replies, “I don’t know.” The toothy cat then proffers the only possible response, “Well, then it doesn’t matter.”

While it’s not the type of exchange that might actually occur in our lives, it should, especially as we consider our financial future. For many people, who have yet to clearly define their financial destination, it probably doesn’t matter to them which path they choose, if they choose a path at all. That may be one way to explain why many Americans are not on track to meeting their retirement goals, or worse, why most couldn’t tell you where they stand today in relation to their goals.

When You Don’t Know Where You’re Headed…

It would also explain why many investors focus on the latest mutual fund returns, or finding the next hot fund instead of their financial goals. It might also be the reason why investors follow the herd and flee the market after it crashes or buy into it only after it has peaked – investment traps too many investors fall into, even though it has been academically verified that such behavior invariably leads to losses or poor portfolio performance. They have no destination, so any path will get them there.

If your investment expectations reside in the current performance of the markets, it probably means you have yet to clearly define your long-term financial objectives, because, what happens today, tomorrow or next year in the markets will have little if any bearing on your long-term objectives.

The Only Performance Measurement that Matters

If, however, your investment or portfolio expectations are based purely on its ability to get you to your specific destination, it means you either have or are ready for a solid investment strategy. The only way to measure the outcomes of your investment decisions is to compare them to your specific objectives, not by comparing them to market indices. And, only through a deliberate planning process will you be able to choose the path that will get you to your destination on time. So, as a matter of course, we take our clients through a comprehensive process that includes:

  • Thoroughly assessing your financial situation and goals
  • Clearly define long-term investment objectives
  • Develop an Asset Allocation Plan customized to your investment profile
  • Fully implement your selected investment strategy
  • Monitor and Rebalance Your Portfolio

From there, our clients expect their portfolio performance to keep them on the path to their desired destination without assuming any more risk than is necessary and with minimal costs. And, with the right kind of investment coaching, they will choose patience and discipline over hot stock tips and the top mutual fund de jour because they know what actually leads to long-term investment success.