Assessing investment performance

How do you know if an investment is performing for you? 

Where to start?

Before you make any type of investment, it's important to consider what your savings and investment goals are – that way you'll have something to benchmark against. For instance, you might be:

  • Saving a specific amount of money to make a significant purchase.
  • Investing to repay a loan or mortgage.
  • Looking to generate the maximum return possible in the shortest possible time.
  • Looking to build a nest egg for the future.

Then you need to look at the amount your investment has provided as a ‘return’ to help you achieve those goals. To do this, you’ll need to look at:

  • What you originally invested.
  • How much have you subsequently put into your investment by way of additional contributions.
  • What you have received from your investment by way of an income, dividends, bonuses, interest or rent.
  • The investment’s time period.
  • The rate of inflation over the period of investment.

How do you make the calculation?

The Money Advice Service has a detailed explanation of what you need to calculate, but in essence it suggests you need to find out what the rate of inflation has been during the time you have made your investment. Then using the information you have gathered, calculate the 'real' return on your investment. This is the return you would have got, over and above the rate of inflation for that period. Find out more on the Money Advice Service website.