SAN DIEGO (ETFguide.com) - After starting the year on a rough note, major stock benchmarks like the S&P 500, Nasdaq-100 and MSCI EAFE are all posting year-to-date gains. Investors that haven't been paying attention may even find themselves surprised to find stocks are in positive territory!

With this year already half over, isn't it time you analyzed your investment portfolio? By evaluating your investments you'll discover if you're making true financial progress or not. An honest evaluation will also help you to find what areas of your investments you need to adjust. 

Here are five key parameters to help you analyze your investments:

Performance

One way to correctly analyze your investment portfolio is to look at its aggregate performance versus major benchmarks like the Dow Jones U.S. Total Stock Market Index (NYSEArca: TMW - News), the S&P 500 (NYSEArca: SPY - News), the MSCI EAFE Index (NYSEArca: VEA - News) and the Barclays U.S. Aggregate Bond Index (NYSEArca: AGG - News).  Make sure you evaluate your portfolio's performance over the exact same time period.  Because there are exchange-traded funds (ETFs) that follow these major benchmarks, simply comparing the performance of your performance versus these ETFs will give you a realistic perspective of whether your investments are progressing or digressing.

Many mutual fund investors and analysts place undue attention on mutual fund performance relative to its corresponding peer group, when the true measure of performance should be a corresponding benchmark index. 'Peer group' comparisons are dangerous,' stated William F. Sharpe, Nobel Prize Winner in Economics in . Because the capitalization-weighted average performance of active managers will be inferior to that of a passive alternative, the former constitutes a poor measure for decision-making purposes. And because most peer-group averages are not capitalization-weighted, they are subject to additional biases.

Risk

The significance of your portfolio's risk goes beyond statistical numbers like standard deviation. For example, many investors are subjecting themselves to manager risk by choosing a portfolio that's 100% actively managed. What happens if your portfolio manager leaves, retires or loses their hot hand? Will your investment portfolio implode? Manager risk is a commonly overlooked dimension of portfolio risk that can't be measured by numbers or statistics alone.

A properly designed portfolio will exactly match your acceptable level of risk. This is sometimes referred to as 'risk tolerance.' Your investment time horizon, your age, your personality and your bottom line investment goals are other factors to consider too. Your investment portfolio's asset mix should reflect a harmonious balance to each of these areas based upon your unique goals.

Diversification

The mis-application of diversification is a common investment disorder. For example, an investor may convince themselves they're adequately diversified by owning five mutual funds that invest in large company stocks. However, true diversification is not achieved by the quantity of funds you own, but rather the asset classes they touch.

Many poorly designed investment portfolios lack market exposure to major asset classes like U.S. real estate (NYSEArca: VNQ - News), international real estate (NYSEArca: RWX - News), commodities (NYSEArca: GSG - News) and the most basic of all asset classes, cash. Under-diversified portfolios can lead to frustration and disappointing results. Conversely, an over-diversified portfolio, as explained in the example above, won't do you much good either. Strive to get diversified market exposure to major asset classes via low-cost investment vehicles, like index mutual funds or index ETFs.

Cost

Numerous academic studies have proven that investment cost is one of the most important factors impacting investment performance. Owning mutual funds with elevated expenses usually results in market underperformance. It's an investment truth as sure as other basic truths, like the law of gravity. While none of us can control the performance of stocks or bonds, we can control the cost of investment management. Keep your fund expenses low.

In evaluating the true cost of your investments, it's important to consider the entire spectrum of costs, not just mutual fund expense ratios. Other fund costs to watch for are your mutual fund's brokerage costs, which are usually reported in the fund's semi-annual or annual report. Your mutual fund's brokerage expenses are an additional cost not included in your fund's expense ratio. The cost of buying and selling securities in a fund's portfolio is passed on to you, the fund shareholder. Therefore, it's advisable to stick with mutual funds that have low transaction volume versus funds that are running up your tab with unnecessary brokerage costs.

Tax Efficiency

A 2008 Lipper study found that buy-and-hold investors with mutual funds in a taxable account surrendered between 1.3% to 2.2% of their annual returns over the past 10 years. In 2007 alone, the tax bite to fund investors amounted to a record $33.8 billion.  Minimizing the adverse impact of taxes should be a priority for all serious investors.

One step towards minimizing your tax bill is to invest in tax-efficient investments that distribute little annual capital gains. In this regard, ETFs can help you. Morningstar recently conducted a survey on capital gains distributions for stock ETFs across 27 broad-based indexes. The study showed only two ETFs made capital gain distributions over the past 5-years while just one ETF made distributions over the past 10-years. Popular funds like the Dow DIAMONDS (NYSEArca: DIA - News), iShares MSCI Emerging Markets Index Fund (NYSEArca: EEM - News) and Vanguard Total Stock Market ETF (NYSEArca: VTI - News) continue to lead the pack in low tax distributions.

Another important factor to consider is what type of product structure your ETF uses. Not all ETFs are necessarily tax-efficient in their design.

In the June issue of our ETF Profit Strategy Newsletter we assembled a list of the top 100 ETFs and exchange-traded products (ETPs) along with their corresponding product structure. This list will help you to put your ETF/ETP investments in the right places in order to lower your tax bill. There are five basic structures: Open-end fund, unit investment trust, grantor trust, partnerships, and exchange-traded notes (ETNs). Each structure has its own unique tax treatment and consequences. Do you know which structures are the best for you? Find out.