Measuring Progress – Yield on Cost or Dividend Yield

Individuals need to set a goal in order to succeed at anything, including our individual investments. Logically, the next step is to determine how we are going to measure our progress. In the realm of investments, most the individual investors (if not all investors) look at annualized returns and compare it with benchmark index. Here in India investors either use BSE’s Sensex Index or NSE’s Nifty Index. In addition, based on multiple discussions I have with individual investors, many investors use percentage based capital appreciation or depreciation which is devoid of time concept i.e. no time scale is involved.

For example, investors love to say “I made 150%, 200%, or 2x or 3x, or 0.5x times my money”. I cannot comments whether this progress measurement is right or wrong because I do not know individual’s objective and/or risk profile.

Ironically, of the many folks I have talked to in last ten years, more than 95% of them have always increased their original capital. Well if that’s the case then who is loosing it? If nobody is loosing, then why the market is more than 50% down from its peak. I am digressing from the subject, so coming back to the topic of measuring our progress…… Continue reading rest of this article…