2016 is over so the important question just lingering over your portfolio is a simple one, right?
How did you do?
How did your financial advisor do?
So, how did you do? What was your performance for 2016?
Or, did your portfolio match, exceed, or underperform relative to the appropriate benchmarks?
Let’s take a look at 2016 with a snapshot of the markets and their performance.
Just looking at a 50% Equity portfolio invested in the S&P 500 and the other 50% invested in the Barclay’s US Aggregate Bond Index would have given you a return of 7.30%.
Did you beat, match or exceed this return? And, is this the right return for you to compare against?
Now, lets add some other numbers to make it more in-line with what might have happened.
Here are some common equity indexes:
S&P 500 Index 11.96%
Russell 2000 21.31%
MSCI Emerging Markets 11.60%
And here are some common bond indexes:
Barclays US Aggregate Bond Index 2.65%
Credit Suisse High Yield Bond Index 18.26%
BofAML Corps 1-10 Year 4.17%
S&P Municipal Bond Index 0.77%
As you can see, the returns are a little all over the place.
How do we do it at Moenio, making a decision about the performance and is it “in-line” with our clients needs?
We start by making certain we know the exact allocation for investments in Equity, Fixed Income, Alternatives and any other asset classes the advisor (or client) was invested. Once that is done we then try to make the invest analysis as simple as possible.
Is the S&P 500 the right index? More often than not, no. It does not represent investments held in other countries nor does it represent another 2,000 to 3,000 stocks potentially used by advisors or investors.
To find the best financial advisor for you and your family requires a proper performance measurement and using the wrong indices can be unfair to you, as a client, or to the advisor you are evaluating.
For 2016 we have seen returns varying from 1.26% to 8.35%. For us, when we look to evaluate an investment advisor on their performance these numbers don’t mean as much as the two-year, three-year and five-year returns coupled with the fees being paid by the client. If an advisor was able to generate 5% on a $1,000,000 portfolio they produced $50,000 for you in 2016. However, what was the fee? This number is important as it dictates what you true return would have been.
Feel free to reach out to us via email and we’ll be happy to spend 30 minutes discussing your performance and the benchmarks.