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What is Investment Performance?

April 04, 2018

  • “Performance” refers to the returns you’re seeing on your investments
  • It can be positive, negative, or even neutral
  • Unhappy with your portfolio’s performance? You can change your holdings or strategy.
1 min read

If you’re an investor, you want your portfolio to provide some sort of return. In other words, you’ll want your holdings to perform.

What is investment performance?

Performance, as it relates to your investment portfolio, usually refers to the returns you’re seeing on your investments.

What’s a return? A return is either the monetary gain or loss on your portfolio Naturally, investors want positive performance, results from a positive return. A negative return, in which your portfolio actually loses money, would signal negative performance.

In other words, “performance” describes how your investment portfolio is doing.

Simple, right?

What determines my portfolio’s performance?

Your portfolio’s overall performance will hinge on a number of variables. But mostly, the holdings — or assets — contained in your portfolio will determine whether you see positive or negative returns.

Your holdings are subject to market conditions. That means that sometimes you’ll be in the red, other times you’ll be in the black. Markets tend to move in cycles, and downturns often swing around into gains — and vice versa. Your portfolio’s performance will probably mirror what’s going on in the market.

Measuring performance

How can you measure your performance? The two key metrics for gauging performance are called yield and total return. Both measure your portfolio’s performance, but do so with differing degrees of exactness.

Yield is essentially the income generated by an investment–whether that’s a coupon from a bond, or a dividend payout from a stock.

Total return, which is generally considered a more precise measure of performance, is the yield plus the percent change in price for a bond, stock, or a fund.

Both yield and total return can help you gauged performance.

Can I improve my investment performance?

There’s, unfortunately, no magic formula to ensure that your portfolio always performs well.

But that’s not to say that there aren’t things you can do to try and improve your portfolio’s performance. In fact, there are numerous strategies and tactics you can engage in to boost your returns or buffer yourself from the volatility of the markets:

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By Sam Becker

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Disclaimers

This material has been distributed for informational and educational purposes only, represents an assessment of the market environment as of the date of publication, is subject to change without notice, and is not intended as investment, legal, accounting, or tax advice or opinion. Stash assumes no obligation to provide notifications of changes in any factors that could affect the information provided. This information should not be relied upon by the reader as research or investment advice regarding any issuer or security in particular. The strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy any security. There is no guarantee that any strategies discussed will be effective.

Furthermore, the information presented does not take into consideration commissions, tax implications, or other transactional costs, which may significantly affect the economic consequences of a given strategy or investment decision. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise of future performance. There is no guarantee that any investment strategy will work under all market conditions or is suitable for all investors. Each investor should evaluate their ability to invest long term, especially during periods of downturn in the market. Investors should not substitute these materials for professional services, and should seek advice from an independent advisor before acting on any information presented. Before investing, please carefully consider your willingness to take on risk and your financial ability to afford investment losses when deciding how much individual security exposure to have in your investment portfolio.

Past performance does not guarantee future results. There is a potential for loss as well as gain in investing. Stash does not represent in any manner that the circumstances described herein will result in any particular outcome. While the data and analysis Stash uses from third party sources is believed to be reliable, Stash does not guarantee the accuracy of such information. Nothing in this article should be considered as a solicitation or offer, or recommendation, to buy or sell any particular security or investment product or to engage in any investment strategy. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. Stash does not provide personalized financial planning to investors, such as estate, tax, or retirement planning. Investment advisory services are only provided to investors who become Stash Clients pursuant to a written Advisory Agreement. For more information please visit www.stashinvest.com/disclosures.