Cost Basis Helps Determine Performance…Incorrectly

05/27/24 • 13 min

Invested Poorly: Sad Tales of FInancial Fails

Are you sure you understand the "Cost Basis" and “Gain/Loss” columns on your investment statements? Cost basis and gain/loss calculations are two commonly misunderstood investment terms. Learn what these calculations actually represent.
Jeff Harrell uses several examples to illustrate how cost basis can be misleading and breaks down this technical concept to help you get a better handle on understanding your investment performance.
What most investors want to know is: how do I determine the performance of a security I’ve invested in, or maybe even the overall performance of my accounts? Jeff provides resources that investors can use to obtain the information you are really looking for when referencing cost basis or that “gain/loss” number.
(Season 1 Episode 8)
Resources Mentioned in Episode:

Vanguard article, “Cost basis doesn't equal performance”
Morningstar.com – Type any symbol in their website's search box to find the security and then click on the tab for "Performance" (mutual funds, ETFs) or "Trailing Returns" (stocks). It will take you to a page on Morningstar’s website that shows you all relevant trailing returns and, even better, compares them to relevant benchmarks so you can evaluate the performance.

Other Episodes Referenced:

Podcast produced by Ted Cragg of QuickEditPodcasts.com
Music Credit: Dream Cave / Adventure Awaits / courtesy of www.epidemicsound.com

Vanguard article, “Cost basis doesn't equal performance”
Morningstar.com – Type any symbol in their website's search box to find the security and then click on the tab for "Performance" (mutual funds, ETFs) or "Trailing Returns" (stocks). It will take you to a page on Morningstar’s website that shows you all relevant trailing returns and, even better, compares them to relevant benchmarks so you can evaluate the performance.

Other Episodes Referenced:

Podcast produced by Ted Cragg of QuickEditPodcasts.com
Music Credit: Dream Cave / Adventure Awaits / courtesy of www.epidemicsound.com

Previous Episode

I’ll Wait to Invest When the Stock Market Pulls Back…Why?

Timing the stock market is something we’re all told not to do, yet all of us are guilty of it at some point. This episode may have the “smoking gun” illustration to help you avoid this poor decision going forward.
Jeff Harrell explains two hypothetical (and impossible) scenarios of the luckiest and unluckiest investors in history—the former buying into the stock market at the very bottom every year and the latter buying in at the very top. How wide do you think the gap is between their portfolio values after a 35-year time horizon?
He adds a third (and more realistic) scenario of an investor dollar cost averaging into the market monthly, instead of annually, and compares their portfolio to those of the world’s luckiest and unluckiest investors.
Don’t answer the following question until you’ve heard this episode: “Is now a good time to invest in the stock market?”
(Season 1 Episode 7)
Resource Mentioned in Episode:

Data illustration of hypothetical stock market timing scenarios - see episode Show Notes on our website

Other Episodes Referenced:

Podcast produced by Ted Cragg of QuickEditPodcasts.com
Music Credit: Dream Cave / Adventure Awaits / courtesy of www.epidemicsound.com

Next Episode

Stock Market Experts on TV Are So Smart…But Can They See the Future?

Perception is often extremely different than reality. Financial news channels may be the posterchild for this. A deep understanding of global economics, business management, politics, financial accounting, etc., still isn’t enough to make you able to truly predict the future.
Jeff Harrell presents the evidence to support this, with shocking data from a research report available on Standard & Poor’s website. It’s another sobering look at what the data actually says about financial experts’ ability to beat the market.
You’ll start to think twice about how the financial advice presented in popular media outlets should, or shouldn’t, impact your investment decision making.
(Season 1 Episode 9)
Resource Mentioned in Episode:

SPIVA® research from Standard & Poor’s

Podcast produced by Ted Cragg of QuickEditPodcasts.com
Music Credit: Dream Cave / Adventure Awaits / courtesy of www.epidemicsound.com

Invested Poorly: Sad Tales of FInancial Fails - Cost Basis Helps Determine Performance…Incorrectly

Transcript

Almost every investor I know can’t help but check to see how their individual investments are doing from time to time. Some do it way more frequently than others, but pretty much all of us want to know if what we invested in has made us any money, and if so, how much. One common way people do this is by looking at their statements or logging in to their accounts online and looking at a column that is typically labeled something like “Gain/Loss” and it usually shows a percentage. I can’