Measure stock portfolio performance vs. Benchmarks especially when trying to decide whether you need a financial planner or if your portfolio needs a major adjustment.
The scenario goes something like this: you sit down for an annual review of your portfolio and find it hasn't moved...or worse, it's actually declined. Is it time to fire your financial manager - or in the case of acting as your own financial manager - is it time to hire one?
It all depends. It is important to use an independent measure of performance before jumping to conclusions. If your portfolio is only up a couple points but the entire market has taken a turn for the worse then it might be time to celebrate. On the other hand, if the overall market is up 20 percent and your portfolio is lagging then serious attention is warranted.
Great. So, what is an appropriate benchmark? Again, it depends upon your portfolio. Try to use widely recognized standards as a comparison: for example, the S&P 500 would provide a good overview for stocks since it is such a comprehensive index. Use a bond index to benchmark the bond portion and be sure to maintain an approximate level of diversity between stock and bonds.