How to assess that your stock portfolio is working for you?

There are two ways to see whether your stock portfolio is working for you – returns and peace of mind.

One way to know that your portfolio is not working is if it consistently experiences negative returns over an extended period. A better way is to compare the portfolio performance with that of relevant benchmarks. If your portfolio consistently lags behind benchmark, it may indicate a problem.

But I like to think that your portfolio should also enable you to sleep soundly at night. If your portfolio causes you significant emotional stress or anxiety, it may not be working for you.

The balance between return and peace of mind varies from person to person. Some prioritize higher potential returns, even if they come with stress. Others may prioritize stability, even if it means accepting lower returns.

I happen to think that both are equally important. It is not just the amount you make but if you stress yourself to make money, you might not have a healthy life to enjoy what you made

(29-10-2023, 08:49 AM)i4value Wrote: There are two ways to see whether your stock portfolio is working for you – returns and peace of mind.

One way to know that your portfolio is not working is if it consistently experiences negative returns over an extended period. A better way is to compare the portfolio performance with that of relevant benchmarks. If your portfolio consistently lags behind benchmark, it may indicate a problem.

But I like to think that your portfolio should also enable you to sleep soundly at night. If your portfolio causes you significant emotional stress or anxiety, it may not be working for you.

The balance between return and peace of mind varies from person to person. Some prioritize higher potential returns, even if they come with stress. Others may prioritize stability, even if it means accepting lower returns.

I happen to think that both are equally important. It is not just the amount you make but if you stress yourself to make money, you might not have a healthy life to enjoy what you made

What about seeking "risk-adjusted returns"? Is it a myth?

Unfortunately the risk-adjusted actually meant volatility adjusted. If you are a fundamental investor, especially if you have a long-term investment horizon, why would you consider volatility adjusted returns? Maybe if you are a short term trader, volatility adjusted may be more meaningly. However I find it strange that short term stock traders would even think in terms of having a stock portfolio.

(30-10-2023, 07:47 AM)i4value Wrote: Unfortunately the risk-adjusted actually meant volatility adjusted. If you are a fundamental investor, especially if you have a long-term investment horizon, why would you consider volatility adjusted returns? Maybe if you are a short term trader, volatility adjusted may be more meaningly. However I find it strange that short term stock traders would even think in terms of having a stock portfolio.

Risk-adjusted returns are bandied about by fund managers, including sovereign funds.
Don't think they are short term traders.

I think that the fund industry have not found a way to assess non-volatility risk. So they ended up using volatility. Just because they are use by fund managers does not make it appropriate. Afterall studies have shown that most fund managers do beat the index.