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A Publication of WTVP

Are you ready for the storm of news articles and advertisements coming about stock performances over the last year? Think you can work your way through a slew of conflicting claims about performance—which stocks and investments beat the market and which ones didn’t? It won’t be easy, if the past is an indication of what we can expect in the weeks ahead. Too often, claims and counterclaims are offered using different benchmarks and different periods of time. Of course, it would be quite easy to measure performance if everyone did their investing on the first day of the year and held all stocks and funds until the last day of the same year. But it doesn’t happen that way. To get a handle on your portfolio’s performance, consider a number of factors:

1. When did you buy your stocks? You’ll want to compare your portfolio’s performance with the standard benchmarks— the Dow Jones Industrial Average, Nasdaq Composite, S&P 500 and others—as the date of your purchase. This is what’s known as an apples-to-apples comparison.

2. Watch the fiscal years during which your investment operates. You might see a claim that “such and such investment” appreciated 45 percent in the past year, beating various benchmarks. Make sure you are making an apples-to-apples comparison.

3. Finally, remember to figure yearly return after you subtract commissions and other costs.

Taking stock of your portfolio on a regular basis is certainly a valuable exercise—I recommend a quarterly examination. If you don’t do it quarterly, at least consider doing it now—at year-end.

What stocks did you buy during the past year? How did they perform? How did their performance compare to the indexes and averages that track the overall market? Sometimes it pays to take an even longer look at your portfolio’s performance. A hot stock from two years back might have cooled in the past 12 months. You may or may not want to sell it, but you should at least consider its performance over the long haul. It is not unusual to find a stock that has a killer year and then slows for a year or two before rolling again. You don’t necessarily want to sell it, but you should consider its performance over time and see what analysts say about the stock’s short- and long-term potential.

Suppose you’ve held on to a stock for three or four years, and over time, have done quite well. But suppose that the bulk of that equity appreciation had come in the first year or two of ownership. Is it time to sell and put your money elsewhere? It might be. Perhaps you should consider gifting that stock to a worthwhile charity. You will help the community and get a nice tax break.

Wondering what research tools to use in assessing your portfolio’s performance? Use as many as you can—print, broadcast and the Internet. One thing you may find is the prospect of a great disparity between a stock’s yearly performance and the performance of the shares of that stock you bought. Such a disparity may suggest that the stock tends to move quickly—up or down—and is highly volatile. Is that the right stock for you? It depends upon your tolerance for risk and the daily swings such a stock brings. One thing it will show is whether you tend to buy on “gut” instinct—perhaps acting on a hot tip right after a news article about a company—or whether you are more measured in your approach, buying after you do the appropriate research. You may make money either way, but you may find out, if you invest based on what happened to the stock the day or week before, that your portfolio may not have done as well as you thought. IBI

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