U.S. Equity Returns

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Performance Analytics Dispersion                 Correlation                               Risk Adjusted Returns  

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Important facts are that a) these returns exclude the negative impact of taxes and fees, b) the mathematics inherently assume that dividends and earnings are reinvested rather than withdrawn, and c) results are always vulnerable to unpredictable market and economic conditions with a serious possibility of loss.  Clients have both these results and their own results, adjusted by their mutually agreeable fee rate, available to them at all times.

This page displays the average rate of return earned by the domestic common stock equities held in client portfolios during each month. Individual information and client-specific returns are private and protected.  The selection of equity securities, while very important, is but one functional area necessary in meeting individual family or charitable needs.  This firm is not typically retained by a client solely for presumed stock-picking performance.  In virtually every case, the firm directly manages or oversees multiple portfolio components, and stock selection is but one component.

These equity returns are internal rates of return linked monthly…time-weighted returns normal to the industry. The calculations do not apply to the total portfolio or any cash holdings. Client portfolios may (or may not) benefit from selling stocks and raising cash when the stock market is high… or buying stocks and reducing cash when the stock market is low. Those benefits, if any, are not demonstrated in these returns as no cash is included.  These returns apply only to stocks and exchange-traded funds and equity mutual funds and are not enhanced by options or leverage, as the intent is to provide a rate of return which may be directly compared to the S&P 500 index or similar U. S. stock market index.  Some effort is therefore made to exclude international stocks as well, although in some instances companies or ETFs or mutual funds with meaningful international exposure may be included in the returns.  It is our opinion that the impact of this is small, appropriate, or not material.  To repeat, the results do not include fees or taxes but do include trading costs, for direct comparison to index returns which do not include fees, taxes or trading costs.

We believe these equity returns are statistically robust because of the number of accounts involved, though the number of accounts involved has grown over time. These averages exclude certain family or related accounts for which some advice or management may be provided but for which no fee is earned. These averages include all appropriate discretionary domestic stock holdings, but may rarely exclude a non-discretionary stock or position being held for long term safekeeping…such holding being maintained for reasons other than pure economic performance.

Each portfolio is custom managed for each client and therefore, by intentional design, no two portfolios have identical performance throughout a market cycle.  Although these returns are pre-tax, we consider your individual cost basis of holdings when making investment decisions for taxable accounts.  In some cases, we therefore hold stocks we anticipate could lag the broad market in the near-term so that a client may avoid paying capital gains taxes, if we believe the security will perform well over time.

As is common to the industry, these returns are a “weighted average” which is calculated by taking the equity rate of return for each portfolio and weighting its importance in the average by the dollar amount of equities held in that portfolio. Therefore, larger portfolios have more influence on the calculation of our average monthly return.  The performance calculations for each account could vary depending on the measurement system or software of the financial institution having custody of the client’s account(s), though it is our opinion that the impact of this is small and not material.  We believe the suppliers of such investment performance calculations to be reliable, but do not guarantee the accuracy or completeness of that information.  The firm has not paid an independent auditor to review the collective calculations of these returns and averages.  Partly for these reasons, we do not promote these returns to be compliant with all of the AIMR-PPS or GIPS standards of the CFA Institute.  Individual returns are reviewed and monitored by the independent accounting and legal teams of client families.  Individual rates of return and income cashflow are carefully detailed with you.

This is a lengthy discussion, but it is important to understand the nature of any statistical information, and the efforts to make it meaningful to the user.  Please contact us with any question or comment, and again, past results provide no assurance of future performance.