As a high-net-worth investor, it’s crucial to have a thorough understanding of your investment portfolio’s performance. This goes beyond simply looking at your total return. Here are some key metrics that can provide deeper insights:
- Risk-Adjusted Return: This measures your return relative to the amount of risk you took on. A higher risk-adjusted return indicates that you achieved a good return for the level of risk you accepted.
- Sharpe Ratio: This metric evaluates your portfolio’s return relative to its volatility (risk). A higher Sharpe ratio suggests better risk-adjusted performance.
- Alpha: Alpha measures the excess return of your portfolio compared to a benchmark. A positive alpha indicates that your portfolio outperformed the benchmark, while a negative alpha means it underperformed.
- Standard Deviation: This measures the volatility or risk of your portfolio. A higher standard deviation means your portfolio experienced larger fluctuations in value.
- Drawdown: This is the peak-to-trough decline of your portfolio during a specific period. Understanding your maximum drawdown can help you assess your portfolio’s resilience to market downturns.
By understanding these metrics and tracking them over time, you can gain a deeper understanding of your portfolio’s performance and make more informed investment decisions. If you’re unsure how to interpret these metrics or want a comprehensive analysis of your portfolio’s performance, consider seeking professional assistance.
