The Truth About Investment Returns for Women

For the average woman, investment returns can be a difficult concept to get your arms around.

That’s because what seems so simple — how much a given investment of money returned during a specific period of time — is, in fact, much more complicated than meets the eye.

This is because the most common way investment returns are measured — how a stock, bond, mutual fund or other investment performed during a specific period of time — doesn’t reflect how your particular investment performed.

And, it may have very little to do with the results of your investment portfolio even when compared to the numbers you see associated with the specific investments in your portfolio.

That’s why so many women are downright bewildered by their financial advisors because the results of the advice, usually investment returns, don’t add up with the returns they see in their investment portfolios.

At an intuitive level, it doesn’t make sense that if you were invested in a group of investments that performed at a certain level, that your actual results in no way, shape or form, reflected that reality.

The reality is that most financial advisors actually fail at what they advertise as their preeminent job: increasing and protecting their client’s wealth.

Instead, most advisors are focused solely on managing investment returns.

Here are four reasons why, which are also fundamental truths about investment returns and something to think about when you, the newly independent woman, is seeking a financial advisor who will help you truly manage your wealth.

For example, most investment returns are stated in relative terms.

Many financial advisors explain investment returns as they relate to investment benchmarks.

Investment benchmarks are indexes such as broad stock market indexes, including the S&P 500, that measure how a particular group of securities performed during a certain period of time.

So, if the market (as measured by the S&P 500) was down 20 percent in a year and your investment “only” lost 18 percent, your financial advisor would be boasting to you that your investments “beat” the market.

You may not be impressed, and rightly so, because your investments actually lost 18 percent during that year.

The bottom line is:

As far as wealth management for women is concerned, there is much more to the relationship between a wealth manager and a client than the traditional definition of investment returns.

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