Investing: A Guide to Tracking and Measuring Your Performance

As an investing guide, performance is a good gauge. Performance and knowing how to track performance guides the investor in knowing how well the investments are performing. After all, good investments should be met with good performance. However, that is not always the case.

Take, for example, a common occurrence in the investment universe with a company that analysts have been recommending. Despite very strong fundamentals, the company still may perform poorly due to reasons other than fundamentals. This poor performance may not be explained by the fundamentals.

It is very important to know how to track and measure performance. Generally, the annual and year-to-date returns are the most common measures tracked. To track and measure performance effectively, different time horizons of performance as well as a benchmark are necessary.

If, for example, you invest in a growth mutual fund, that fund should have a benchmark index that compares to mainstream growth stocks. What's more, the different time horizons compared to its benchmark and other leading performers will give investors a clue as to when professionals had been succeeding and when they had been failing in the managing of the mutual fund. This can be done by broad line rate of return comparisons.

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