The market did not do well last year. It also seemed worse psychologically because of the big drops in October and December. How did you do? I know many people that obsess over how well they did when the market is up performing analyses on their analyses; but when there are losses they seem to bury their heads in the sand. They don’t want to know because it annoys or upsets them. Wrong way to act!

Burying your head in the sand is a way to pretend that something did not happen or doesn’t exist; and hopefully it would go away. However, that doesn’t work in the real world. I think it is more important to know how you did when the market is down, to make sure that you are not continuing something that has you on a wrong track. You know how I feel – those with well thought out investment portfolios with broad based positions should stay the course. Nevertheless, they should review how they did to make sure they are not doing something they shouldn’t. Here are some ways to do this.

Most brokerage statements and investment managers provide information about portfolio gains or losses for the previous year. The question is, how did you do relative to the market? Your losses should be somewhat aligned with the major indexes. My charts posted on Jan 8, 2019 provide the 2018 losses for the four major indexes – the Dow Jones Industrial Average, S&P500, The Nasdaq composite and the Russell 2000. Based on the composition of your portfolio you should compare your performance with the appropriate indexes. Three indexes lost from about 4 to 6 percent and one, the Russell 2000 small cap fund, lost 12 percent. If your losses were in these ranges, then you did OK relative to the market. You still lost, but you are in the market and cannot expect gains every year. I am not factoring in gains or losses on bonds since the reason for investing in bonds should be for interest and not gains or losses. If you were in bond funds and lost, then shame on you.

Getting back to your stock portfolio. You also earned dividends, and that is part of your total return or would reduce your losses, but that is not the way to measure your performance. Compare the losses in stocks with the indexes and see how you did in that regard. If you lost more, then perhaps your portfolio is not as well rounded as you believe. Ditto, if you lost less and while you should feel good about the lower losses (or even gains), you should also consider whether you’ve taken on too much risk or if your positions can sustain itself going forward.

Keep in mind, i.e. never forget, that you should not be trying to make a killing, but rather have a portfolio designed to secure your future – both with asset AND cash flow growth. Check it out. Hopefully it isn’t, but just in case it is, take your head out of the sand and figure out what happened to you last year. It’s important. It’s VERY important to your future financial security.

Do not hesitate to contact me with any business or financial questions at [email protected] or fill out the form below.


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