How to Evaluate Investment Portfolio Performance

Portfolio performance is more complicated than simply looking at "how much I started with and what do I have now." You should put portfolio performance in context relative to investment goals, risk tolerance, and the investment climate for the assets invested. This is a guideline on how investors can measure their investment successes.

Goals. Understanding why you are investing is the first step in structuring a portfolio, as well as in establishing a framework for viewing portfolio performance. There are a few questions investors need to ask themselves and review with their advisors before starting to invest. Specifically, What are my investment objectives? What is this money for? What kind of risk am I willing to take? What is my time horizon? It is important that you work closely with your advisor so you both have a clear understanding of your specific needs and goals.

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Managing the Relationship Between You and Your Advisor

One of the most important issues to consider when hiring an investment advisor is the relationship you hope to establish. A strong affiliation based on communication and trust is critical to the long-term success of your investment relationship. While it is your money that the advisor will invest, there are specific items for which each of you is responsible.


The Facts. To properly manage a relationship with your advisor, it is important that you give this individual the ingredients necessary to manage your account. The assets you are placing under management do not exist in a vacuum. You should provide a full disclosure of your financial assets and obligations and let your advisor know how they currently fit into your financial goals and objectives. Will the advisor handle all of your assets, or a portion of them? What are the assets for: retirement, education, or general long-term growth? When will you need the assets?

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Why Select a CFA® Charterholder?

Successful investors recognize the importance of education and knowledge when it comes to managing financial assets. But while they may spend countless hours learning about markets, securities, and associated risks, investors often overlook the qualifications of the professionals whom they hire to manage their money.

If you work with investment advisors, they will have access to the personal details of your finances, so their credentials should matter to you. There are a number of reputable and applicable credentials that financial professionals in different disciplines may hold, but none is as rigorously focused on investment knowledge as the Chartered Financial Analyst® (CFA®) designation. Understanding the significance of the CFA charter — and what is required of investment professionals in order to hold it — can be useful information when choosing an investment advisor.

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Choosing a Financial Advisor

The relationship between you and your financial advisor is an important one, and there are questions you should ask before proceeding. As with any important personal decision, you should devote time to making a careful evaluation of your situation, requirements and alternatives. It is impossible to guarantee the performance of a financial advisor, but asking the right questions can help you make the most appropriate choice for your needs. CFA Institute has created this fact sheet to answer North American investors' most commonly asked questions. You can learn more by visiting other Educated Investor fact sheets, such as Managing the Relationship Between You and Your Advisor. Additionally, investors may access Web links for investor organizations outside of North America.

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Cutting through the Confusion

Where to Turn for Help with Your Investments

There are many reasons you might want help with your investments. Perhaps you want to start a college fund for your child. Maybe you are concerned that you are not doing enough to save for retirement. Or maybe you simply feel the need to get your financial house in order.

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