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Principle 7: Monitor Portfolio Performance Against Benchmarks

President Thomas S. Monson stated:

Where performance is measured, performance improves. Where performance is measured and reported, the rate of improvement accelerates. (in James R. Moss, “Sheep, Shepherds, and Sheepherders,” New Era, June 1977, 20)

How can you know how your investments are doing if you do not monitor their performance? Benchmarks are passively managed portfolios of financial assets; benchmarks indicate how well your financial assets are performing. Set your own portfolio benchmarks and then monitor your portfolio performance on a monthly, quarterly, and annual basis. Many benchmark returns are available freely via the internet.

If you must invest in actively managed mutual funds, compare the assets’ performance against the benchmarks you have set (after taxes). If the return on these assets is consistently lower than the benchmarks you have set, consider investing in no-load (mutual funds sold without a sales charge), low-fee (mutual funds with low expense ratios) index funds or ETFs which will be discussed later in this website. The returns on index funds and ETFs generally more consistently match the performance of selected benchmarks than actively managed funds.


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