Chapter 8. Measuring Your Performance
In This Chapter
Seeing the importance of tracking your performance
Figuring out the best way to calculate investment performance
Using online tools that can measure your risk and returns
Choosing the right benchmark
It's surprising how many investors keep buying and selling stocks online even when they have no idea whether they're beating the market. They'll brag at cocktail parties about the winning stocks they've bought. But if you ask them what their rate of return is, they'll look at you blankly. Most online brokers don't help either, because many don't have tools that accurately measure your returns.
To me, investing online without knowing how you're doing is like driving with your eyes closed. As an online investor, it's pretty much up to you to calculate your own returns. To help you get back in control, this chapter first shows you how to manually calculate your returns and how much risk you've taken to get those returns. In case you want more handholding, I then discuss online sites and software that do all the calculations for you. Either way you choose, you'll be miles ahead of other investors who keep investing without knowing whether they're successful.
The Importance of Tracking Your Performance
You learn from an early age to monitor your progress with most things. As babies, your height and weight were plotted on charts to illustrate how quickly you were growing and how your size ranked with other infants. In school, your progress was ...