Yearly Statement: A Comprehensive Guide to Evaluating Your Investment Portfolio

As the year comes to a close, it's an opportune time to review your investment portfolio's performance and assess its effectiveness in generating consistent income and capital appreciation. A yearly statement provides valuable insights into your portfolio's performance, risk, and overall health. In this article, we'll discuss key performance indicators (KPIs) to consider, how to reflect on your investment strategy's effectiveness, and the importance of comparing your portfolio to its benchmark or peers.



1. Key Performance Indicators (KPIs) to Consider
When evaluating your yearly statement, consider the following KPIs to gain a comprehensive understanding of your portfolio's performance, risk, and overall health:

- Return on Investment (ROI): Measures the profit or loss generated by the portfolio as a percentage of its total investment cost.
- Year-to-Date (YTD) Return: Shows the portfolio's performance for the current year.
- 5-Year Average Annual Return: Provides a longer-term perspective on the portfolio's performance.
- Standard Deviation (Volatility): Measures the portfolio's risk by calculating the dispersion of returns around the mean.
- Sharpe Ratio: Measures the portfolio's risk-adjusted performance by comparing its excess return to its standard deviation.
- Sortino Ratio: Similar to the Sharpe ratio, but focuses on the portfolio's downside risk by using the standard deviation of negative returns.
- Maximum Drawdown: Measures the peak-to-trough decline in the portfolio's value before a new peak is achieved.
- Alpha and Beta: Alpha measures the portfolio's excess return relative to a benchmark, while beta measures its sensitivity to market movements.

2. Reflecting on Your Investment Strategy's Effectiveness
The yearly statement reflects the investment strategy's effectiveness in generating consistent income and capital appreciation by showing the portfolio's year-to-date return, 10-year return, and CAGR since 1989. These metrics provide insights into the portfolio's performance over different time horizons, allowing investors to assess its consistency in generating income and capital appreciation.

For example, the "Rick Ferri Inflation Fighter Core-4 Portfolio" has a year-to-date return of 2.66%, a 10-year return of 3.0%, and a CAGR since 1989 of 6.52%. These figures indicate that the portfolio has generated consistent returns over the past year, decade, and long-term, suggesting that it has been effective in generating both income and capital appreciation.

Similarly, the "Scott Burns Couch Potato 8.94" portfolio has a year-to-date return of 8.94%, a 10-year return of 7.01%, and a CAGR since 1989 of 8.39%. These metrics show that this portfolio has also performed well in generating consistent income and capital appreciation over various time frames.

By examining these metrics, investors can evaluate the effectiveness of the investment strategy in generating consistent income and capital appreciation and make informed decisions about whether to include the portfolio in their investment portfolio.



3. Comparing Your Portfolio to Its Benchmark or Peers
When comparing your yearly statement to its benchmark or peers, consider the following factors to gain a comprehensive understanding of the portfolio's performance, risk, and overall effectiveness:

- Performance: Evaluate the portfolio's total return compared to the benchmark or peer group over different time periods.
- Risk: Assess the portfolio's risk profile, including volatility, drawdowns, and standard deviation, and compare it to the benchmark or peer group.
- Asset allocation: Analyze the portfolio's asset allocation and compare it to the benchmark or peer group.
- Expenses: Evaluate the portfolio's expense ratio and compare it to those of the benchmark or peer group.
- Turnover: Assess the portfolio's turnover rate and compare it to that of the benchmark or peer group.
- Tracking error: Calculate the portfolio's tracking error and compare it to the benchmark or peer group.
- Cash flow: Evaluate the portfolio's cash flow and compare it to the benchmark or peer group.
- Tax efficiency: Assess the portfolio's tax efficiency and compare it to the benchmark or peer group.

By considering these factors, you can gain a comprehensive understanding of the portfolio's performance, risk, and overall effectiveness compared to its benchmark or peers.



In conclusion, a yearly statement provides valuable insights into your investment portfolio's performance, risk, and overall health. By considering key performance indicators, reflecting on your investment strategy's effectiveness, and comparing your portfolio to its benchmark or peers, you can make informed decisions about your investments and achieve your financial goals.