Meaning of Money: Measuring Investment Success

Dreams of financial prosperity and security spark a person’s desire to invest. It is necessary to keep that spark alive throughout the investment process, by adopting certain behaviors and mentalities that can optimize your efforts and effectively measure your success.

In our latest podcast with Brad Kasper, president/CEO of LSA Portfolio Analytics, we learn more about these characteristics, and how they can help you move closer towards your financial goals.

Measuring success is often misunderstood, it is something we spend a great deal of time trying to teach our clients about so that their expectations remain reasonable and so that they don’t get too fearful if the markets get, well… shall we say, interesting.

Are you familiar with the saying mind over matter? Well, in the world of investing, this phrase holds a great deal of weight. When you invest, it is important to remember that you are making a short-term sacrifice for a long-term gain. In most instances, the objective is financial prosperity, security, or the attainment of a goal, which are all typically longer-term in nature. This may sound obvious, but it highlights a common issue amongst investors.

Brad Casper and Michael Clarke break down some necessary steps that you can take to accurately measure investment success:  

1. Identify what you are trying to accomplish.

Ask yourself, “What are my ultimate goals?” and determine whether or not you are on the right track with your investments. Identifying your success is dependant on what you want to accomplish with your current investment strategy. The best strategy is one that is forward-looking and aligned to your financial goals. Keep in mind that there is no “one-size-fits-all” approach. Your particular framework must be aligned with your particular goals.

2. Lay out your investment timeline.

Be prepared for ups and downs in the market. An organized timeline allows you to set realistic expectations and helps calm your nerves when you hit a low point. It acts as a reminder to look at the bigger picture, and not to make emotional decisions based on what is happening right now. Have confidence in an investment’s larger story, and don’t be swayed by short-term volatility. Long-term investors succeed based on periods of time lasting years or more.

3. Check in with your finances at least once per year.

Things change. Life can sometimes get unexpectedly expensive. It is crucial to reevaluate your financial standing and ability to invest at least once per year. As Micheal explains in the podcast, investment money can be broken down into two categories: defensive and offensive. Defensive money is money that you cannot afford to put at great risk (such as retirement funds). Offensive money is money that you can, in a sense, afford to lose because it does not impede your trajectory (such as crypto currency). Keep these categories in mind when conducting your yearly financial audit. Use your best judgment when it comes to deciding how/what to invest.

4. Determine a realistic way to achieve your goal.

The key to any successful investment is to have strong processes in place. This includes laying out a clearly-defined financial goal in your portfolio, having a realistic timeline of your investment, effectively managing risk with yearly financial check-ins, and a forward-thinking mentality. Just remember to align your framework to your ambitions and remove emotional, short-term decision making from the process.

As a general rule, do not let the ups and downs of the market scare you away. Oftentimes when investors see the low points, they fear the worst. However, with the right portfolio in place, you can be on your way to financial freedom.

Listen to the Podcast – Click Here

Check the background of this investment professional on FINRA's BrokerCheck

Advisory services offered through EWG Elevate, Inc. dba Eagle West Group.

This represents a partial list of clients. They have not been compensated and were not selected based on duration, performance, account size.