By: Jack WaymirecloseAuthor: Jack Waymire Name: Jack Waymire
Email: jack@InvestorWatchdog.com
Site: http://www.investorwatchdog.com
About: Jack entered the financial services industry as an institutional consultant and later as vice president at Warburg, Paribas, Becker in 1976. From 1983 to 2003 he was the President of Lexington Capital Management and related companies. In December, 2003 John Wiley published his book "Who's Watching Your Money? The 17 Paladin Principles for Selecting a Financial Advisor". In 2004, he founded PaladinRegistry.com, a website that educated investors about financial advisors. A national Registry of pre-screened, five star rated advisors was added to the website later in 2004. In 2009, he founded InvestorWatchdog.com, a website that provides tools and information to investors who use the services of financial planners and financial advisors. Since 2004, Jack has been frequently quoted in the media on topics about financial advisors, Wall Street firms, investment scams, and the financial services industry (BusinessWeek, Forbes, Kiplinger, Washington Post, etc.).See Authors Posts (66) | January 19, 2012 | Investor Information, Performance Reporting, Watchdog Benchmarks, track records

There are three performance numbers that should matter to you.

First, is your performance goal. Let’s assume you have to average a 10% rate of return to achieve your financial goals.

Second, is your absolute performance. What return did your investments deliver? If your performance was 10% then you achieved your financial goal for that year. You should also differentiate between gross and net returns (after expenses are deducted). You may find your 10% return became 8% in which case you lagged your goal.

Third, is your relative performance. This is the number that really matters. How did your investments perform compared to a benchmark. For example, your absolute return was 10%, but your benchmark was up 20%. On a relative basis you lagged your benchmark by 50% – not so good.

Relative return benchmarks also tell you how you performed during negative years. For example, your benchmark is down 10%, but your portfolio’s performance is only down 5%. On a relative basis you win because you lost less.

Investor Watchdog is launching a new website in the next few weeks that contains five sophisticated performance benchmarks. Some of the benchmarks have up to 12 asset classes and they use varying asset allocations to reflect different tolerances for risk. You select the benchmark and we monitor your results for you.