Determining Your True Return on Investment

Challenge: How do non-financially savvy investors determine what their true returns are?

Things are not always as they seem. Imagine a husband and wife are referred to a seemingly reputable financial advisor. At first they are comfortable with this advisor. After all, several friends referred them. They are under the impression that their portfolio is well diversified. They believe that the financial advisor's past performance is exceptional. For a while they are satisfied.

Investor’s Concerns

Being cautious, they decide to get a second opinion. The first thing the new advisor notices is that they are exposed to serious risk of loss of principal. Although they are diversified within the stock market, they have no diversification outside of that. Secondly, although the financial advisor has outperformed the S&P 500 Index over the previous five years, it is only because he had one quarter of triple-digit returns. Without that one quarter, his performance is far worse than the index and significantly more volatile.

Strategy and Solution

This scenario is not uncommon. Most investors either lack the time or the analytical expertise to dissect the true return generated by an investment advisor. Determining real performance requires digging deep into the details. That is a primary skill set of Cornerstone Wealth Management. We apply it regularly in servicing our clients and when evaluating the portfolios of prospective clients seeking a second opinion.


Back to previous page

Disclaimer: Information provided is for illustrative purposes only and should not be considered investment advice. The information provided is hypothetical in nature, does not reflect actual investment results, and is not a guarantee of future results. No reliance should be placed on any such information when making an investment decision. Nothing herein is intended as an endorsement by any person of Cornerstone nor should the information be construed as a statement of a typical client’s experience with Cornerstone. No guarantee of investment performance is being provided and no inference to the contrary should be made. .