Investing is the means to an end as you invest with a goal in mind which you want to achieve. Whether you wish to start a manufacturing firm, secure a comfortable retirement or buy a house, your investment activity is the medium to those ends. You may have developed a good portfolio as an enabler to achieve your financial goals. To have a portfolio is not the end. You need to monitor your investments.
It’s needful to ensure that your investment portfolio is on the right track. It should affirm the realization of gains in the future. Nowadays, you don’t necessarily need to contact your financial advisor for updates. You can use web-based tools or apps to assist you to monitor your accounts. Access your financial information about quarterly and learn how your investments are performing.
There is a positive impact in tracking your investments. You won’t have to move your money in a panic because of an economic crisis. Here are several tips to equip you to monitor your investment:
- Confirm Your Assets Value
You should always have an accurate figure of your investment in shares, contribution to pension scheme among others. Never treat your investments like savings, even savings earn interest. Data plumbing in the financial service industry could report elusive balances. You need to know what you are working with and if you are headed in the right direction.
You can track your holdings using Sharesight and to get started, use the guide on how to get set up your share portfolio. Your initial steps include providing the most basic information like the opening balance.
- Calculate Your Portfolio Performance
Don’t over-rely on your broker to serve you with information about the performance of your portfolio. Neither should you use a spreadsheet to find out how your portfolio may have grown. It will be tricky, time-consuming and full of errors. Outsource the task to a purpose-built online product and instead focus on investment ideas. Use online software like Bloomberg and SGX mobile and others to track your investment.
It incorporates charts and graphs to show your portfolio holdings and income. It can offer performance comparison and analyze your assets to show your actual exposure. There are also websites available that help with portfolio analysis and include Mint.com and Morningstar.com.
- Identify the True Drivers of Your Performance
Investment is the game for the smart. You need to understand what contributed to your gains. Evaluate what investment decision led to those identified drivers. Then, you can validate what is driving your portfolio by developing and marketing those products. While validating these products, you should not overlook analysing underlying exposures. Surrounding factors to any asset performance may not remain constant.
- Create Portfolio Benchmarks
The same way you use financial plan to decipher your investment direction, you will need a benchmark to guide if you are on track. Set up a weighted, blended benchmark compatible with your target allocation. Then keep comparing your holdings against your relevant benchmarks. Also, monitor your overall accumulation progress against the various targets set in your financial plan.
Benchmarks can also be used to evaluate actively managed funds since their success is determined by how they outperform their underlying index. But check the performance over a more extended period as any fund can outdo a benchmark over a short period.
Nevertheless, don’t put over-reliance on benchmark as investing is not a competition but rather about achieving goals. You may be happy with your portfolio outperforming a benchmark, but it doesn’t necessarily mean a comfortable retirement. It is, therefore, worthwhile to work with your financial advisor when it’s not clear.
- Find Out the Price You are Paying to Invest
Fees are a necessary evil that investors may not avoid. Research demonstrated that a self-guided investor pays as much as 20% of their returns to fees annually. To get advice and use costly platforms you part with 50% of your gains.
Without monitoring your fees, you may not get this revelation. Sharesight can help track the fees you pay for every trade. You only need to connect your online broker to the Sharesight. If your broker is overly expensive, you can switch to another broker. Every investor’s goal is to take home better returns and therefore fees paid should be minimal.
You can also decide to have ETFs which are cheaper rather than Managed funds. However, if you want to retain your funds, find out ways of cutting down the administration and transaction costs.
- Be Keen to Watch Interest Rates
Change of interest rates has a significant impact on the share prices. What happens precisely when interest rates rise? Any Country’s Central bank regulates the interest rate at which banks lend and borrow from each other. This precept has a ripple effect across the entire economy. Though it takes about a year for a change to take effect widely, the market responds almost immediately.
Understanding how this relationship might affect your investments will help you make favorable financial decisions. Mostly, interest rates are regulated to control inflation in the economy. When rates are high, borrowing becomes expensive even for customers.
To companies which also borrow from the banks, their growth slows down. This will curtail expansion and induce cutbacks and thus decrease earnings. The decline of stock price takes effect to make investing in stock undesirable. Investing in equities thus becomes too risky, and it is advisable to switch to other investments.
- Seek Investment Ideas from Others
You should subscribe to investment research websites like Morningstar to get investment news and insights. The Morningstar uses economic scoring and fair value metrics to evaluate market performance. Such can be useful to assess a company’s performance on a long-term basis. These investment research companies will usually give stock recommendations in a very transparent and insightful way.
Such companies hunt in many market environments and provide constructive ideas. Fund managers also publish their own research. Use Morningstar to seek the best fund managers and follow their local insights. It can also mean paying for weekly newsletters which provide terrific investments contents.
Being on your toes with research will help you to stay organized. Ensure to have price alerts set to help you to contemplate when to get your money out of the market. Even when your dividends trip in, you can’t consider this as a total loss. You can use the capital losses to pay your bills.
Written by ZUU Online
This is a guest post by ZUU Online, an Asian-based Finance Education Portal aimed at helping individuals to improve their knowledge on personal finance and money, through educational articles on business, investments, property and insurance.
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