Rosalind Evans
Investors across the globe are seeking more innovative ways to monitor their portfolios. While many have been laser-focused on tracking value and returns, experts highlight three additional often overlooked metrics: dividends, fees, and asset allocation.
Delving into Dividends
A portfolio’s annual dividends might be the unsung hero of investment metrics. Dividends aren’t merely numbers; they represent real profits distributed by businesses. The stability of dividends is also noteworthy. For instance, while Vanguard’s S&P 500 Index Fund fluctuated recently, its dividend payouts, such as $5.44 per share in 2021 and $5.99 in 2022, remained relatively stable. However, it’s essential to note that, like all good things, dividends can see downturns, as witnessed during significant economic disruptions in the 1920s, 1930s, and 1970s.
The Fee Factor
Fees are the silent erosion of investment portfolios if not tracked meticulously. It is crucial to know how much one pays their investment advisor, understand the expense ratios of funds, and be aware of the overall portfolio’s weighted average expense ratio. To put it into perspective, a mere one percent fee on a substantial investment can considerably reduce its value over 25 years.
Anchoring Asset Allocation
Knowing how investments are allocated in stocks, bonds, or international equities is fundamental. Many are surprised that numerous investors must know their portfolio’s exact allocation. Historical data, such as that provided by Vanguard, underscores the importance of this aspect. A subtle shift, like moving from a 60/40 to a 70/30 stock/bond allocation, can significantly impact returns.
While tracking value and returns is essential, diving deeper into dividends, fees, and asset allocation can offer investors a holistic view. This comprehensive understanding equips them with the knowledge to make informed, strategic investment decisions.
