By Scott Ronalds

We’ve been banging the drum on the issue of performance assessment for good reason. Most investors don’t know how their portfolio has performed, and most firms don’t want to tell them.

This reality was expanded upon in a recent article by Larry Swedroe on CBS’s Money Watch site. He cites a study in which the researchers compared investors’ actual returns to how they thought they fared. It concluded the following:

• Investors frequently overrated themselves (only 30% considered themselves to be merely average), and overestimated their portfolio performance by over 11% per year.
  
• Investors seemed unable to admit to poor performance. Only 5% of the sample believed they had negative returns, while the actual number of investors in the red was 25%.
  
• On average, investors underperformed their relevant benchmarks.

While this is just one study, we frequently come across situations where investors think they have performed better (or worse) than their actual results indicate. This can lead to poor investment decisions. And it’s why we show investors their actual returns on their account statements and will continue to make noise on the issue of performance assessment.