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PUBLIC: Performance Check 2016 – Dr. J's Market Thoughts Press "Enter" to skip to content

PUBLIC: Performance Check 2016

In previous articles, I’ve shown you how your money is being skimmed and used by financial professionals to line their pockets regardless of YOUR financial outcome.  Are you ready to take control of your own future?  Does that scare you?  Do you want someone else to blame for a poor outcome?  Does anyone else care more about YOUR money than you?


Using a financial professional isn’t wrong, especially if you are not willing to take full responsibility for your investment decisions or want a professional opinion to help guide you.  Employing an expert makes sense in those cases.  But not holding them accountable for their performance is inexcusable.  Do you even know how to measure their performance?  Let’s discuss that.


Take out your last “year end” mutual fund or 401(k) statement AND a calculator.  I’ll wait.  Yes, however long it takes to find it.  Got it?  Good.  Let’s look it over.


Somewhere on that statement, a good company will tell you in big bold print how your account performed for the previous year.  If they don’t, shame on them for making this harder than it should be.  But to get a rough guess for comparison purposes, simply follow this formula:



{           STARTING TOTAL $$$                    }       – 1.00   = % (multiply by 100)


An example would likely help. Suppose you have a $100,000 starting amount in your 401(k) on January 1st, 2016.  You contributed $12,000 to your account through regular $1,000 per month paycheck contributions.  And your account ended December 31st, 2016 with a total of $125,000.  In simple terms, how did the account perform?  $125,000 – $12,000 = $113,000.  Divide that by the starting total of $100,000 and you get 1.13.  Now subtract “1” from that 1.13 to get 0.13 on the calculator.  Multiply by 100 and you have earned (roughly) 13% on your money!  Congratulations.  But, my question to you is:  Is that result good or bad?  How would you know?  What should you compare it to?


Again, Keeping It Simple Stupid (K.I.S.S.): What did the Dow Jones Industrial Average or S&P 500 US Market Indices do in 2016?  Most Mutual Fund Managers and Financial Advisors call these “benchmarks.”  If the benchmarks returned 4% in 2016, your 13% return sounds great, right?  If the benchmarks returned 24%, your 13% sounds paltry and you have some questions to ask on why you didn’t make more money in 2016!


By a simple measure found on the Internet (so it must be true), the S&P500 is listed as having gained 9.54% (without counting dividend income). In that case, 13% sounds like a very nice return for the year.  Since you made that 13% after fees were paid, you did very well.  Congratulations!


But what if you made 6%? Did you schedule a talk with your financial advisor about the relatively poor performance compared to the benchmark right away in January 2017?  Why not?  Because you didn’t bother to run these numbers and find out what happened and hold them accountable like 99.9% of the investing public!  Would you like to now?


Realistically, if you made between 7.5 to 11.5% in an investment account where you paid advisor fees (roughly 2% above or below the benchmark), you likely performed as you should have. If you made more than 12%, congratulations.  If you made less than 7%, you might want to schedule that meeting and ask some questions to learn what happened.  Just my opinion!


Some ideas to think about before that meeting: 1) Calculate previous years’ performance data and see if this a continuing trend, or just a rare slip up in performance; 2) what fees did I pay this year?  3) where there any specific investments that didn’t perform very well in 2016 to hold back performance?  4) how much cash were we holding in the account, and why?


  1. Michael
    Michael January 31, 2017

    How would have the sell signal at the end of January 2016 been handled? Would there have been a corresponding buy signal later in the year?

    • Dr. J
      Dr. J January 31, 2017

      Yes, there was a BUY signal generated upon the close of March 31st, 2016 at SPY $205.52 as noted in the most recent post put up tonight. There have been no other signals created since then except “BUY” signals indicating investors to keep dollar cost averaging or employing other strategies to accumulate equity exposure to the US Stock Market.

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