Rate of Return: How are my investments doing?

Your statement tells you what your investments are worth today. It also tells you what you paid for them. But your statement may not tell you how fast your money is growing.

For example, say you invested $10,000 on January 1 last year. A year later, your statement shows your investments were worth $500 more, for a total of $10,500. How fast did your money grow? That $500 equals 5% of your original investment. We call that percentage your rate of return for the year. It's a clear, simple measure of your progress.

Don't get too concerned about your return from month-to-month or even every quarter. The stock market goes up and down all the time. When you're investing for long-term goals like your retirement, it's really important to keep a long-term view of things. Short-term results do not always reflect what you'll see over many months or years.

Other things to watch for:

• Rate of return can be complicated. If you've deposited new money or bought additional units of an investment, it's hard to tell what's new money and what's your "return". And if you've transferred your investments between financial firms, information about your original purchase may be lost. That's why it's important to keep all your statements in a safe place.
• Some statements calculate a rate of return for you. If your statement shows a return, make sure you know what time period it covers. For example, the return can apply to a month, three months, year-to-date, the last 12 months, 3 years and so on.
• You may see a rate of return listed for some investments in the financial news. This number may not match what you see on your statement because the time periods are different. In addition, you may hear or read about various benchmarks that track the performance of certain types of investments. A stock market index like the S&P/TSX 300 helps you keep tabs on how the whole market is doing. The index tracks a group of selected stocks that represent the market or a part of the market in some way. Following benchmarks gives you an idea of how a certain category of investments is performing but those benchmarks may not match your investments. Talk to your advisor to find out what benchmarks are available that can show you how investments like yours are performing.