Family business: Annually reviewing portfolio is a wise time investment

Taking care of your future requires taking control of your finances. Being in control comes from knowledge, awareness, and an objective viewpoint.

How well do you manage your money? Seldom do investors actually know how their portfolios are performing. Realistic expectations are also not set. Emotions should not play a role in the financial/investment decisions. Managing expenses is part of this goal called "Financial Independence." Mastering these factors helps lead to accumulation of wealth.

Have you set realistic expectations? How is your portfolio performing? Are your assets working for you? Set realistic and measurable goals owned by you, not borrowed from someone else. Just desiring financial independence does not work.

A net worth statement/balance sheet for every financial planning client should be prepared. This statement is repeated yearly and measures how well you have done. Have your expenses exceeded your cash flow? How much capital was depleted and why? Has your net worth increased from new monies being added to your portfolio, or from the actual portfolio performance of the invested assets?

You should know how well you have done within your investments and overall net worth building or preservation. Often people have no idea what their return has been on their assets. Another problem is that individuals try to measure against unrealistic yardsticks. Know if you are meeting your goals or if you need to make changes in your portfolio. With proper information, an investor can make intelligent, profitable decisions regarding their assets.

Common ways to review your success could include:

Cumulative return — This is the total return of your investment over time. For example, a $100,000 investment, which increases over 10 years to $200,000, has a cumulative return of 100 percent.

Annual return — This is the average annual percentage/profits earned from your investment. The $100,000 above actually had an annual return of 7.2 percent. For example, the same $100,000 would be worth $400,000 if left invested for an additional 10 years and earned that same 7.2 percent annual return for that period.

Total return — This is your total annual profit earned, adding both dividends and capital appreciation. To realistically calculate the total return of a stock, you would add back the dividends paid. On bonds, you would include both the interest payment and the net depreciation/appreciation in the face amount of the bond.

Real rate of return — This is the actual return of your investment after inflation is considered. To calculate, subtract the inflation rate from the total return on your investment.

After tax return — This is your total return less any taxes paid attributed strictly to this investment. When inflation and taxes are considered, it is usually suggested that investors have a portion of their assets invested in equities.

Take time at least once a year to review your overall investment/financial planning results for a more focused and successful portfolio.

Kim Ciccarelli Kantor

Kim Ciccarelli Kantor, CFP® CAP’ is president and founder of Ciccarelli Advisory Services Inc., a family owned and operated firm in Florida and New York, which provides comprehensive financial investment and estate planning services for individuals, families and businesses. Her book is "Preserving Family Wealth & Peace of Mind."

Ciccarelli Advisory Services, Inc. is located at 3066 Tamiami Trail N. #202 in Naples, FL (239-262-6577)

Investment advisory services offered through Ciccarelli Advisory Services, Inc., a registered investment adviser independent of FSC Securities Corporation. Additional securities and investment advisory services offered through FSC Securities Corporation, Member FINRA/SIPC and a registered investment adviser.

The views expressed in this newsletter may not reflect the views of FSC Securities Corporation.

The examples above are for illustration purposes only, not indicative of any specific investment product.

© 2012 marconews.com. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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