If you are doing things right, you shouldn’t be beating the market. Let me tell you what I mean.
A common approach to analyzing your accounts is to compare your values to the market indices, i.e S & P 500, DOW, NASDAG, etc. There probably are over 50 different indices which comprise several different markets. Although that is a common approach, realistically if you are doing things right, you will never beat the indices (market).
Every now and again, I get a question from someone that says their account didn’t perform as much as a specific index. Well, there is a simple answer for that …. you are not 100% in that index.
The biggest obstacle I have as your financial advisor is of not only managing emotions, but expectations. Everyone wants high returns, but very few want the risk or are unwilling to take the risk to achieve those returns. Making money without losing money is just human nature. Investors must understand that one doesn’t always get compensated for additional risk. Many times, there is no additional return for the increase of risk.
So when you take a look at the returns of your portfolio, remember …. you have all types of stocks, bonds, preferred stock, cash and many other fixed investments that will lower your returns. However, those other investments as there for other reasons. Most importantly they are there for your retirement income. When you combine all these different investment vehicles, they are never going to beat some arbitrary individual benchmark.
On any given day, a portion of your portfolio is going to fluctuate. If you are investing correctly in retirement, you must evaluate your portfolio based on the income (and reliability of that income). The arbitrary value of your account vs. the index is not going to tell you anything.
If you understand this it will help you keep your peace of mind into your retirement.