It’s time for our first half of the year performance review. In today’s column, I will give you some tips on how to assess your results and what questions to ask when auditing your account.
The market, the S&P 500 (large caps), from the end of 2013 to July 1 showed a +6.47 percent return (per stockcharts.com). The mid-caps received top honors with an impressive +7.08 percent return, and the small caps had a very unimpressive +2.76 percent return. In addition, the NASDAQ led the three major indexes with an impressive +6.11 percent return. The Dow Industrials had a paltry +1.95 percent first-half return.
If you are self-managing your portfolio, learn how to design performance-style charts to keep you in the loop per the performance of all of your securities. There are two very important types of charting -- performance and pricing. All investors need to know how to design, read and most importantly understand what they can tell us.
If investors do not know how their securities are performing compared to the market, they have a problem. Is this you? If your portfolio is managed, then you should have had a call by now to schedule a mid-year review. If this has not happened, then you need to call them. If you do not have at least a yearly account audit, then you have an additional problem. To begin with, review each account performance goals and objectives to make sure everyone is on the same page.
Here are fair questions to ask during your account review.
1. What were the returns of each security compared to the market? Compare the returns in three different time frames – long-term since March 2000, from March 2009 and the first half of 2014.
2. If you outperformed the market, then be sure and let your broker/investment professional know they did a great job. If you underperformed the market, then you deserve to know why!
3. Find out the facts re how much in fees you are paying per account/security each year. This may be a touchy area, but ask yourself, “Whose money is it?” View these fees as the cost of doing business.
4. Find out if there is “revenue sharing” with any of your securities. Revenue sharing is what the mutual fund companies pay certain brokerages on the amount or the size of their holdings and, with the current laws, is perfectly legal. For more information, google my previous column from April 29, 2012, titled, “Revenue sharing: Kicking the Hornet’s Nest?”
5. Ask their outlook for the remainder of 2014 and what is their strategy for when the market has another drastic round of selling, like we had in 2000 and 2008? What is your downside protection for the next downturn? A downturn is not a question of if, but when it happens.
Be sure and note the tone and feedback from your financial professional when asking these important questions. True professionals welcome and promote these questions.
One last question -- if you are not at least matching the return of the market, “Why should I continue to invest with you”? Give your financial professional the same degree of professionalism and courtesy that you would expect to be given to you.
Next week, I audit the sectors using performance charts to see which sectors of the market have outperformed and underperformed the general market.
Plan your work, work your plan and learn to share your harvest!
Source: stockcharts.com, davidoengland.com.
Full Disclosure-I do not hold any of the securities listed in this column.
DAVID O. ENGLAND is the founder of the Eye on the Market Radio Show and Training Academy and retired associate professor of finance at John A. Logan College. This column is presented for educational purposes only and is not intended as financial advice. For questions, contact England at thetraderseye@gmail.com.
