Performance reporting: another reason to love Folio Investing
Investment performance is something that is over-emphasized by many investment advisers, both by how much time they spend talking about it with clients as well as how much time, effort, energy, and money is spent producing performance reports (performance reporting software can cost into the five figures on an annual basis and many firms employ full-time staff to download and reconcile transactions and report performance).
It is necessary, though, to have a quick and accurate way to measure how your investment accounts have performed over historical periods, and to have a reasonable basis of comparison to know how you are doing.
Another reason to love Folio Investing.
Folio provides its accountholders an easy way to track performance. It is based on an accurate, time-weighted, measure of performance which is very important. Many brokerage firms, investment advisers, and personal finance software programs use a dollar-weighted measure.
The difference between the two methods is that a dollar-weighted measure includes the effects of cash flows in and out of the portfolio. If, for example, you make a large deposit into your account right before the market enjoys a steep run-up, your performance, under a dollar-weighted measure, will be high relative to a time-weighted measure of return.
The time-weighted measure allows you to objectively evaluate the performance of the underlying securities while removing the effect of any inflows or outflows. It's a more difficult calculation but Folio's system does the heavy lifting for you.
You can also easily change the start and end dates and compare your account's performance to one of many benchmark indices, mutual funds, or individual securities.
The performance shown above is hypothetical and does not represent a real investment portfolio.
John Gay and Frisco Financial Planning LLC receive no compensation or "soft dollars" from Folio Investing or any other brokerage firm.
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