https://money.usnews.com/investing/investing-101/articles/2018-08-27/5-ways-investors-can-rate-their-portfolio5 Ways To Rate Your Portfolio
Aug. 29, 2018
How do you know if your income-oriented investments are paying as much as they could, and without too much risk?
It can be a dilemma for an investor shifting focus from growth to income. In the decades devoted to growing the portfolio, there are plenty of benchmarks for gauging performance. If your fund of big-company stocks trails the S&P 500 index, you know you could do better. If you beat the benchmark you can celebrate or look closer to see if your holdings are too risky.
Income-oriented investors like retirees have benchmarks, too. But comparisons aren't always so easy. If you have a fund or individual stocks aimed at producing dividend income, an index like the S&P 500 might not be suitable, since most of its performance comes from rising share price rather than its modest dividend earnings, currently just under 2 percent.
"For most retirees, the S&P 500 is not a suitable benchmark," says Matt Hylland of Hylland Capital Management in North Liberty, Iowa. "More than likely your portfolio has a significant amount of bonds by the time you near retirement and comparing their performance relative to large-cap stocks is not useful."
Bond investors can judge performance against the gold standard, the 10-year U.S. Treasury note, now yielding about 2.8 percent. But that may not be a good benchmark for riskier corporate or municipal bonds that pay more than Treasurys. Fortunately, there are bond indexes too.
"We believe that investors should know what the safe side is supposed to be doing compared to peers," says Nicholas J.D. Olesen, director of private wealth at Kathmere Capital Management in King of Prussia, Pennsylvania. "We utilize the U.S. aggregate bond index and total bond index as our gauges for those that are predominately fixed-income focus." Performance of each can be found by searching the names online.
The pros have some tips for telling how your income-producing investments are doing. – Jeff Brown
Click here to continue reading and see these five tips.
