How to Avoid Regretting Your Investment Decisions

One unfortunate way investors often measure their own financial success is by comparing their returns against popular benchmarks like the S&P 500 Index. It’s tempting to measure your own performance against that of others, it’s even strangely comforting. It’s just like getting a test back in school and immediately wanting to know how your friends did. It didn’t feel good to be the lowest of the group, right?

But when you’re comparing investments, if you compare apples to oranges, the results could hurt you in the long term, knocking you off-course from the plan for success you put in place long ago.

That sense of loss—the woe you feel when your portfolio falls short of a common benchmark—is called tracking-error regret, and it’s our responsibility as advisors to keep our clients from succumbing to it.

Tracking-Error Regret: Cause and Effect

“The S&P 500 is up 19% year to date!”

“International stocks offer double-digit returns in Q2!”

“Real Estate delivers 15%+ performance in 2015!”

Headlines like these are fairly common. If your own portfolio’s growth doesn’t measure up, you might regret the decision you’ve made and wonder what changes you need to make to pull in the big bucks.

Before you do that, ask yourself a couple questions:

  • Am I using the right gauge for measuring?
  • What do the reported figures actually mean for me and my wealth?

How Do You Measure Financial Success?

Your financial success isn’t about how your returns compare to a common benchmark. It’s about you and your own personal goals. “Success” happens when (1) you and your family have the money you need to live the way you want to live, and (2) you can enjoy life without stressing over financial headlines.

You can achieve this success in a number of ways, but the general rule of thumb is to focus on things you can control and avoid getting tangled up in things you cannot.

Click here to download McLean’s fact sheet, “Are You On the Path to Disciplined Investing?”

How to Avoid Regretting Investing Decisions

Investing as a Personal Journey

The final point in the table above gets to the heart of why it’s critical to avoid tracking error regret.

Imagine you want to drive from LA to DC and during your trip you want to hit one museum in every state. You chart out your whole course and schedule to stay with family and friends along the way, plus the occasional reasonably priced hotel.

Then, the day before you leave, you see an ad online offering a flight from LA to DC for a fraction of what you’re spending on your trip. You’d probably quickly recognize that while the deal makes more financial sense, it doesn’t reflect your personal goals. With maybe a sliver of regret, you would most likely stick to your original plan.

Think of your portfolio the same way. It was not created to track an index, it was created to help you reach your financial goals. So when you look at your portfolio, measure it against your personal plan, not the S&P 500 or the Dow Jones or any other common benchmark.

If you want help developing a financial plan to measure your portfolio against, check out our ebook, “How to Develop a Successful Financial Plan.”


McLean Asset Management Corporation (MAMC) is a SEC registered investment adviser. The content of this publication reflects the views of McLean Asset Management Corporation (MAMC) and sources deemed by MAMC to be reliable. There are many different interpretations of investment statistics and many different ideas about how to best use them. Past performance is not indicative of future performance. The information provided is for educational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy or sell securities. There are no warranties, expressed or implied, as to accuracy, completeness, or results obtained from any information on this presentation. Indexes are not available for direct investment. All investments involve risk.

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