Tracking your investments is more than glancing at those monthly statements. A regular investment review needs to be done. Of course there are no set rules, just some basic guidelines to consider.
While looking over monthly statements are a good thing. It would be irresponsible to only focus on past performance. Our investments are based on future potential. At least they should be.
The fund companies remind us of this in small print all the time. Past performance is not a guarantee of future results. Our investment review should focus more on future results and whether our investments have the potential to meet them.
If you have to, there is enough financial software out there to help track your money. Your income, expenses, savings, checking, retirement, and brokerage accounts can all be tracked with one package. If anything, it will free up several hours on a Saturday.
Investment Review Schedule
Stocks – We need to stay updated on company information for stocks and any short-term investments really. This means reading any relevant news about companies/industries you own and track. I prefer to do this daily, but it can easily be done over a couple of hours every weekend. Be ready to spend extra time digging through quarterly financial statements and conference calls.
Bonds – Bond prices and rates usually don’t see drastic daily changes. But it does happens. If you own individual bonds, it’s a good idea to stay on top of changes in bond yield just in case.
Performance Review – When those monthly statements show up, read the whole thing. Did your money get deposited? In the right investments? Check the performance for the month, year, and 3 year periods. Check what investments are working, what’s not. Do any changes need to be made? Long term investments like mutual funds and ETFs can be reviewed monthly or quarterly if it helps to keep that long-term focus.
Asset Allocation – Do a monthly asset allocation review. Are your investments allocated properly? Do you need to rebalance? I prefer the 5% rule. Say you want a 60/40 stock to bond split. You would rebalance if the allocation gets to a 65/35 split or a 55/45 split.
Tax Liability – Realistically this will be done when you sell any taxable asset. You should also keep track of the original cost basis (purchase price and number of shares) of all taxable assets. This goes for all mutual funds, stocks, bonds, and ETFs not in a retirement account. If you owe taxes on any investments, put some money aside now. It beats scrambling in April to come up with the cash.
Retirement Savings Goals – Every three months is a good time to check your retirement contributions. Are your retirement goals on track? Will that IRA be maxed out? Can you save more money to your 401k or IRA without breaking your budget? Now is the time to make any adjustments.
The best time for a complete investment review is just before year-end. This gives you a chance to take advantage of tax changes before the new year, adjust your asset allocation if necessary, review your investment goals, retirement goals, risk profile, and net worth.
Major life changing events always affect our money. When this happens it’s a good time to do a full financial review. That means family changes: births, deaths, marriage and divorce. Major income changes: job loss, new job, big raise, winning lottery ticket or inheritance from a long-lost uncle. If you need to, make the necessary beneficiary form changes for any retirement accounts.
Things change all the time, which changes your overall financial picture. Review your goals and make the necessary changes sooner, rather than later.