How do you know when your investments are performing well? The
question is more complicated than it sounds. It is also an
important one, because making the right investment choices can mean
the difference between achieving your financial goals and falling
short.
Find the Right Benchmarks
The traditional way to measure investment performance is to
compare results with an appropriately matched index. Assuming your
portfolio and the index share similar characteristics, this method
can provide you with valuable information about your
investments' performance.
If your portfolio outperforms this
index — particularly over the long term — you generally
can feel confident in your investment selections. However, if your
portfolio regularly underperforms the index, it is time to
investigate. One common reason investments such as mutual funds lag
their benchmark indexes is because of the expenses associated with
managing these funds. So, before you assume you own a dud,
