Are Your Investments Doing Well?  Really?

Are Your Investments Doing Well? Really?

Are your investments doing well?  Really?  How do you know?  In this video, I go over how to tell if your investments are doing as well as they should be.  Many people compare their investments to the S&P 500, but is that really a good comparison?  Finally, do you even know what the performance of your investments are?  Many advisors don't even tell you.

This video was inspired by a viewer question:  Should I be comparing my accounts to the S&P 500?  If you've always wondered if your investment accounts were doing as well as they should, this video may be eye-opening.



Patrick King: How can you tell if your accounts are really doing well or not? Find out coming up.


Patrick: Hey there folks. I'm Patrick King with Transformative Financial. Here on this channel, we help people make money, keep money, and feel more financially secure along the way. If that's something that you're interested in, please contact me. My email is My contact information is below in the show notes. I'd love to talk to you and see if it's a good fit.

For today's episode, are your accounts really doing well? All the time I'll talk to folks and when I tell them what I do, they'll say, "Yes, that's great. My accounts have been doing really well lately." In the back of my mind, I always think, "Well, are they? How can you tell?" If you're with most investment firms, you may not get a performance report. You might get a monthly statement, but you don't really know how well your accounts really are doing.

Then, when you know that, how do you know if that's good or not? Today's episode was inspired by a question that I got from someone. Recently, the S&P 500 and the Dow Jones Industrial Average have been in the news lately because, quite frankly, they've been down a little bit. There's been some what's called “volatility” which means bouncing up and down of those stock indexes. People gravitate towards that S&P 500 and think, "Hey, that's what I need to be comparing my accounts against."

Well, is that a really a good measure of how your accounts are doing? It's probably not. Now the S&P 500 - really all that is a basket of the 500 largest United States companies that are on a stock market. It's just a basket of really big companies in the United States. Chances are that's not all that you're invested in. If it is, we need to talk. [laughs]


There's a whole wide range of universe of stocks out there. There's these medium and small companies within the U.S.  There's international developed countries that have stocks out there you can invest in. There are emerging market countries that have their own stocks and stock markets too. There's a big wide world of stocks that you could be investing in. Comparing it against the 500 largest US companies may not be quite fair. In addition, you might have things like bonds and real estate and other real assets in your portfolio that aren't really apples to apples comparison with a stock index too.

For my clients, what I try to do is give them an actual benchmark that is, again, apples to apples comparison of what their portfolio should be doing. What I do is I'll do a blend of a couple of benchmarks. One is like a basket of all the stocks in the world and another is a big aggregate bond index. I'll blend that compared to how their stocks and bonds mix is blended and then every quarter they can see how they're doing compared to that appropriate benchmark, not just the S&P 500.

For them, I expect to be around that benchmark every quarter. I might beat it some quarters, I might not beat it some quarters, but if I’ve beaten it by a lot, I'm probably taking too much risk. If I'm not even coming close, then I'm not doing something right, either. With the tweaks that I make in the portfolio over time, I expect a little bit of outperformance from that benchmark over time. The fact is most investors don't even come close to the benchmark period.

If I can get my people in that area where they're not making big mistakes and they're in that top level of investor returns consistently over time, then I'm doing my job. It's good to have apples of apples comparison.

The temptation is always there to try to, "All right, let's really beat the benchmark." Is that a good strategy? I like to compare this whole investing game to like a season on the NASCAR circuit.

If you think about the teams, there's not a whole lot of difference between the cars, the drivers, the crews. What makes one team perform better than another? I think the real secret is to screw up the least. The way to make a lot of money is to not lose big chunks of it.

Back to our comparison to the race. If you think about a team that consistently executes quick and efficient pit stops, they're going to have huge advantages over the teams that screw one up every once in a while.

If you think about the drivers that get a little too aggressive on their tires, well guess what? They're going to have a hard time keeping up with the teams that know how to push those tires, get the right amount of speed out of them and make them last for a few more laps. Those little things, over time, add up to consistent finishes. If you're doing those right things, you're going to have a chance to win the checkered flag at the end of the race.

You're going to have top tens along the way. You're going to get a chance at the cup at the end of the season. I don't know what it's called anymore, but it used to be the cup. Anyway, is it right? Anyway, not even relevant.

Like I said, the best way to make a bunch of money is to not lose big chunks of it. Like I said, most folks don't even get to that benchmark and they're not even close. My job in a lot of ways is to be like the pit chief and make the decisions around, "What is our strategy going to be?"

"When are we going to hold to those strategies and how we're going to execute?" There have been plenty of times in my career where, in one moment, I've paid for a lifetime of my fees by talking a client out of a bad decision. That would be a bad pit stop, "Let's sell here," or, "Let's buy this." That's the real trick to investing over time. It's just screw up as little as possible. My job is to keep my clients from doing that.

The pro mentality around investing is counter to all of our natural instincts: fear when the market's down, elation and greed when the market's up. What I try to do is inoculate my clients against all of the headlines, against all the euphoria, against all the panic, because we've got a strategy in place that will work over time.

If you've got needs now, we're going to have planned for them ahead of time. You don't have to, all of a sudden, take a draw from your account when the market's down. That's part of the planning process.

That's what I've got for today. Make sure, if you think your accounts are doing good, and I hear this all the time from people, "They're doing good." They tell me in a tone that's really uncertain. Figure out what is your real benchmark. It's probably not the S&P 500.

Do you even know what your performance is on a quarter-by-quarter basis? A lot of advisers don't tell you. They don't want to and all their clients don't know what to ask for.

Are you really doing well? That's my question for you.

If you want to know, give me a shot. We can talk. If you liked this video click like, subscribe for more. Patrick King with Transformative Financial. Thank you for watching. Cheers, until next time.


[00:08:24] [END OF AUDIO]

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