Managing Return Expectations

pensionerstoWhat does “Managing Return Expectations” mean? In my world it means several things. First, it means having a true understanding of your goals and needs for the money being invested. Is this money made up of “retirement funds?” Is it money set aside for education? Is it earmarked for emergency use? Does it have a specific need and objective? Until this is determined, I am not sure if you can determine a “reasonable investment return” expectation. Second, it is important to know how much risk are you willing to take with your investments to achieve the goal you have assigned to it? Now I know and I often hear clients say “I just want my investment to grow.” Or they say, “I just want my investment to keep up with the S&P 500.” And, I have even been told by clients that they believe that “certainly high quality dividend stocks will give us at least a good yield, so no less than that is expected in return.” All of these kinds of statements are attempts to set and gauge returns to some known or recognizable index. But, the reality of the market place is that the markets swings both ways. It will go up and go down which can make money, lose money, or stay relatively flat, but your risk tolerance is truly what you feel is a range of acceptable gains and/or losses within a reasonable time frame.

If you have not gone to our web site ( and used our Riskalyze software to help you understand your risk tolerance level, do so. It is both eye opening and extremely helpful in provide you a true picture of your risk tolerance.

Third, with the risk level determined and investment purpose defined, we can now begin to manage towards an “understanding of expected returns.” At this point in the return formula we must add all types of data, such as: asset types, economic conditions, geo-political events, in favor /out of favor investments, the Federal Reserve, The European Union (EU) and the Qualitative Easing (QE) programs, ISIS… my list can go on. But, with this understanding of current events and matching up to your risk level with your investment purpose, then you should begin to get a sense of what your “expectations for returns,” can be. But please, realize this evaluation is active and changing. It should be thought about often. With clear stated goals, an active managed approach, and working within you risk level, managing your expectations for return can be a positive and rewarding experience.

We all want our money to grow and get bigger. But we all like a good night’s sleep too. The last thing you and I want is to be worrying about the hard earned money we have worked so hard to save.

So when it comes to “managing your return expectations” let’s remember purpose, risk tolerance, current events, and then invest with those expectations.

Have a Great Year, come on SUNSHINE and SPRING.




• The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance references is historical and is no guarantee of future results. All indicies are unmanaged and may not be invested into directly. • Investing involves risks including possible loss of principal. No strategy assures success or protects against loss. • The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.