How does one measure investment performance?

Measuring investment performance effectively often involves assessing the percentage of gain or loss over time. This method provides a clear and quantifiable metric that reflects how well an investment has performed relative to its initial value. By calculating the percentage change, investors can determine the overall return on their investment and assess whether it has met their financial goals.

In addition to this, tracking gains or losses over time allows for the analysis of performance during different market conditions and periods, providing insights into the investment's resilience and growth potential. This approach is widely accepted among financial professionals as it offers a straightforward basis for comparison with other investments or benchmarks.

While comparing performance to market averages, assessing the diversity of a portfolio, and considering an advisor's satisfaction may provide additional context, they do not directly reflect the actual return generated by the investment itself. Instead, they serve different aspects of investment analysis and may not give a complete picture of performance without the fundamental measure of gain or loss over time.