Which PortfolioCenter reports show the value drop is not my fault? | Krisan's BackOffice Inc

September 2011 ended the worst quarter in terms of performance returns since I started working with PortfolioCenter in 1992.   What PortfolioCenter reports could you send your clients to explain that while their portfolios are down, the drop does not necessarily result from bad management?  Here are my two cents.

  • Send the same reports you send every quarter.  Resist the temptation to completely change reports because the market is down.  Clients are likely to view the switch as an indication that you have something to hide.  However, you could modify reports to show the context or add an additional report.
  • Send a performance report that shows long term performance — more than the last three months.  If you typically send the Portfolio Performance Review on the quarter, add longer time period returns to the bottom.  The report allows you to add the TWR for up to 8 different time periods.  In addition to the quarter, you could add returns for the last 3 years, 5 years, 10 years and since inception.  If you already focus on long-term performance and use a report like the Comparative Performance Review, review your time periods.  Perhaps you’ve been including performance on the last 12 months, 3 years and 5 years, but you could adjust to 5 years, 7 years and 10 years now.
  • Compare your returns to an index or a target.  While the index figures aren’t available as I write this, some ETFs are close to the official index numbers.  For the quarter, the iShares S&P 5oo (IVV) is down 13.7%, the iShares Russell 2000 Small Cap (IWM) was down 21.8%, the iShares Russell 3000 Value (IWW) was down 16.6%, and Growth (IWZ) was down 13.9%.   Context can explain why a performance return that looks awful is actually great.  You might consider using the Portfolio Performance History or the Comparative Portfolio Performance with an appropriate index numbers.
  • Visually show the big picture.  Clients tend to measure their portfolio against the last high-water mark, but it’s always good to have been invested if you go back long enough.  If you invested your money on the worst day 20 years ago, odds are great that you would have healthy gain today despite the last quarter.  Consider sending the Portfolio Overview from the Client presentation package.  On one page, this report shows  both the since inception return and  a mountain graph of growth versus value.
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