When it comes to investing, it’s basically just nonstop questions, such as the type of investments to make, when the best time is, why, and how long, and the questions can get more complex. Well, it’s not really a secret that investing wisely requires more than just picking the right stocks or assets—it also involves accurately measuring and evaluating your investment performance. There’s just so much that goes into this, including math, predictions, risk management, and even psychology!
Investing is so intricate; in a way, it’s like gambling because it really can be hard to know what will happen next. You may think that you know, even with the information that you have, but the unexpected can still happen! Regardless, having an effective performance measurement (and understanding how) can truly provide valuable insights into the success of your investment strategy, identify areas for improvement, and inform future decision-making.
As you can see, this is so powerful, it’s needed, and it’s actually a full-on requirement. But there’s always room for improvement, especially when trying to optimize returns. So, with that said, how can you do it?
Are the Objectives Clearly Defined?
This is Investing 101, and while this is super obvious, sometimes you need to restart right back at the fundamentals to make sure it’s all going to work out. So, define what success looks like for your portfolio—are you aiming for long-term growth, income generation, or capital preservation? Are you doing this for an organization? Is this for a client?
What’s the purpose? What’s the benchmark for all of this? Why is this even important? Well, it will serve as a point of reference for evaluating relative performance and providing context for your investment results.
Get the Professionals On Your Side
When it comes to investing, especially if you’re in an organization, you’ll have to be compliant; this is 100% not negotiable. But in general, it can be hard to navigate what’s right, what’s wrong, and just how to improve. Sure, you can look online, but for the most part, it’s just the same advice worded differently over and over. So that’s why it’s going to be better to get a professional on your side.
You can absolutely expect professionals to provide personalized insights and professional analysis, and there are even some that do GIPS consulting, too, if that’s what you need! You need to have strategic guidance, and if you’re going about this alone or with limited information that’s online, you’re doomed to fail, and you may even face compliance issues. So, think of professionals as a safety net.
Use the Best Tools Out There
If you’re not doing this, even you’re doing it all wrong! If you’re doing this for a client or organization, then you essentially have no choice but to use tools and other technologies, as it’s basically a requirement. Honestly, the best way to go would be portfolio management software, data visualization tools, and performance attribution platforms since these can help automate calculations, visualize performance trends, and generate insightful reports.
But this is all that is needed to analyze the performance. Chances are high that you’re using something already, but it might be handy to look and see what else is out there. Thanks to AI, there are constantly more tools and software coming out, so it’ll help to just look into that.
