How to Analyze Your Stock Market Results

If you're in the market, you probably want to analyze your holdings and stock market results from time to time. Who doesn't? Although most financial experts suggest not obsessing over your portfolio and/or your specific stock market results too often, you need to know what facts and figures really count when you do. What do all those terms mean and what should you look to maximize and minimize? Over what periods of time?

The first rule of thumb: look at any stock market result metric on at least a yearly basis -- nothing shorter. The market gyrates way too much from day to day for you to be able and make any solid judgment on any stock result within a few weeks, a month or even half a year. The metric most can easily understand - rate of return -- can either be positive or negative. If you purchased shares of a mutual fund or individual stock share for $100, and the value of that stock or mutual fund share was $110 after a year, you would have made a positive 10% rate of return. That is, your ending price ($110) divided by your cost ($100). If the value of your share(s) were only $90 at the end of a hypothetical year, then your negative rate of return would be -10%.

Most financial calculators that help you plan for future events like college savings, home down payments and retirement use a 10% or 12% positive rate of return to zero on potential stock market results so you can easily find the number of years you have to build that veritable nest egg for whatever purpose. Most are basing those positive rate of return percentages on the historical return of the entire stock market over decades -- something you may not see in your stock market results for, well, decades.

And, let's not forget taxes and fees when considering your stock market results. Brokerages houses do charge fees for buying and selling stocks and mutual funds (a reason to buy and hold and not trade to often), and there are annual fees related to almost all mutual funds that can eat into your rate of return. Index funds, however, are mutual funds that have very low costs. As such, millions hold them for that very reason: They basically track the entire market and cost very little to own and maintain.

Taxes? Yes, they can eat into your positive stock market results as well. Since tax situations vary so greatly among investors, you won't find them referenced in most stock market marketing literature. Without knowing your specific tax situation (see your accountant for that), be advised that Uncle Sam will get his fair share somewhere along the way -- and you need to know approximately where and how much if at all possible. If your positive rate of return is 12% before taxes but it 8.5% after taxes, that's a huge difference, right? It's your money -- any difference is a big one when it comes how you're able to perform in the stock market.