How to Measure Portfolio Performance

Your portfolio consists of different investment activities you own, such as stocks and bonds. A good investor wants to know how well his portfolio is performing. One of the easiest ways to measure this performance is to look at the return on your investments. The return on your investments looks at the total cost it took you to purchase all of your investments and compares the amount to how much your investments are currently worth. Time frame is important. You want to clearly define the period you are measuring performance since portfolios can have good and bad years.

• 1

  Define the period you are want to measure performance. Most investors will look at yearly results, but as you get closer to retirement, you may want to look at the life of your portfolio.

• 2

  Add together the current value of each asset in your portfolio. For example, you have stocks worth $500 and bonds worth $100 for a total value of $600.

• 3

  Add together the costs of all your investments. The cost of your investments will depend on your period. If you are looking at the life of your investment, then you want to look at your initial cash outlay for each investment. If you are looking at a specific period, then your cost will be the value of your portfolio at the beginning of the period. In the example, the stocks cost you $250 and the bonds cost you $50 for a $300 initial investment.

• 4

  Divide the total value of your portfolio by the total cost of your portfolio. In the example, $600 divided by $300 equals 2. So your portfolio doubled since you bought your assets.