Some Handy Tips to Evaluate the Performance of Your Investment Securities

Some Handy Tips to Evaluate the Performance of Your Investment Securities So, you have taken all the possible efforts to ensure that you pick only the best securities to invest in – you evaluated your objectives, considered portfolio diversification, weighed your expectations and risk tolerance, conducted an equity fundamental analysis, and finally shortlisted the perfect plan to invest in the chosen securities. So, has your task been completed yet, and can you rest assured? This is where the prospect of performance evaluation steps in. Just like a company’s recruitment duty is not over simply after hiring an employee, an investor’s responsibility also extends beyond investment in stocks and other securities. Frequent evaluation of the performances of these securities ensures that you know where you are headed with your investments. Here is a look at some tips to evaluate the performance of your investment securities: 1. The Yields Vis-à-vis the Current Market Trends After having started your investments in specific asset classes, it is important to constantly keep track of the general market trends and price fluctuations of these assets as you go along. Study the shifts in market trends and determine whether your securities reflect these changes. If the trends are going against your initial expectations, you may choose to rebalance your portfolio to include more investment schemes of the asset class that is experiencing an upward trend. Such an in-depth and constant analysis of the market trends helps an investor to understand what direction s/he is headed in. 2. The Yields Basis Your Current Requirements Change is the only constant; your financial requirements may undergo major shifts as you proceed on your journey. As a result, the asset allocation strategy that you may have used at the start of your venture may no longer hold good. You might want to revisit your investment portfolio and re-evaluate your investment plan to satisfy your changing requirements. This re-evaluation includes understanding your current plans and previously set objectives; the changes in your purchasing power and income; and the need to vary the denominations of investment amounts allocated to each security. If you have invested in government or corporate bonds, consider whether the income you receive is sufficient for you to satisfy your present requirements. Such careful consideration enables one to prevent his/her investment strategy from getting redundant.

3. Calculate Your Rate of Return Many reputed stockbrokers and registered investment advisors regard the rate of return as a reliable criterion to measure one’s investment yields. To calculate your rate of return, start by evaluating the changes in the value of the asset from the time you purchased it to the present. Then, add up this value with the returns you received (in terms of interest and dividend) from the investment venture. Finally, divide the obtained sum by the investment amount spent by you. The resultant figure is the rate of return of your investment. Simply put, the formula for rate of returns is as follows: Rate of return = (Changes in the value of the investment + aggregate returns earned) _______________________________________________________ Investment amount spent The rate of return figure helps you to understand the nature of returns being earned by you compared to the amount you may have spent in the investment avenue. 4. Incorporate Your Overhead Investment Charges Often, the amount you spend on your investments is not limited to the investment corpus. A substantial amount of money is also spent on overhead charges including brokerage fees, entry loads, taxes on returns, transaction fees etc. It helps to consider even these overhead expenditures while calculating your returns. Ideally, the returns you receive from your investment in stocks and other securities should not only compensate you for the amount spent directly on the investment but also the indirect costs incurred in the process. Conclusion Investing in securities is a major expenditure decision for any individual; therefore, it is important to ensure that you receive optimal returns on your investment. These returns must also satisfy your present requirements and changing risk tolerance, helping you lead a comfortable existence. And we are here to help achieve this sense of harmony through your investment strategies.