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Monitoring your Investments

Discussion in 'What is Investing? (START HERE)' started by InvestOpen, Jul 4, 2018.

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  1. InvestOpen

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    Monitoring your Investment

    At least once a year in nearly every country, publicly traded companies provide their annual results on operations in accordance with accounting standards. Some offer guidance and updates more frequently on a quarterly basis. Yet, even between those time periods, other events occur including stock price changes, geopolitical events, social changes, and more. Part of any investment plan includes a way to monitor and measure your investments.

    Monitoring Systems
    • Portfolio Analysis: Most of the large institutions provide investors reporting that shows them their current portfolio balance from stocks to bonds. Some even allow you to bring in your personal financial information including mortgages and credit card debt. These expansive reports allow investors to see their overall balances by category and compare them over the course of time.
    • Filings: Whether using annual filings or quarterly filings, the regular reporting from public companies provide insight and financial information on the performance of the company, as well as where they expect things to go in the future. Additionally, large investors who take positions in companies are often required to submit public filings as well. Knowing whether key investors such as Warren Buffet or Carl Icahn are investing or divesting in your holdings can provide insight.
    • Analyst Reports: One way to keep on top of your investments is to look at how others evaluate that investment. While Wall Street analysts typically have a bullish bias, any reports and analysis they provide can help you calibrate your own research to what others are thinking.
    • Company Investment Material: Most people don’t realize that companies often provide easy to read PowerPoint decks and materials on their website to explain their financial filings. These materials allow investors who aren’t as well versed in accounting concepts to understand the company’s performance and future prospects.
    • News: Whether it’s a good old fashioned newspaper or an online tweet, news can drive the value of a company up and down in a matter of seconds. Breaking news on a company’s impending bankruptcy can send share plummeting in a matter of moments, while lucrative buyouts can send it soaring.
    Evaluation Metrics
    • Change In Market Value: The simple calculation of what your investment is worth today relative to where it was some time in the past provides the most basic answer to the question of how much have I made.
    • Rate of Return: While a portfolio of investments can have winners and losers, the overall rate of return on the portfolio defines how well your investments are doing as whole. Comparing this to a benchmark index such as the S&P 500 can help investors evaluate whether they realizing any gains relative to simply purchasing a market index fund.
    • Risk: Risk is a difficult metric to define and measure, in part because of its subjectivity and timeliness. JC Penny would have been a relatively low risk investment in the 1990s, but would be seen as a coin flip only a few years ago. Most people measure risk in terms of potential valuation or price changes in an investment over a certain period of time relative to other like investments. If a stock is likely to move twice as much as the S&P 500, all things being equal, most investors would assign it twice as much risk relative to the S&P 500.
    Be sure to record all your investments and keep up to date with them using a software or by formulating your own spreadsheets and reports.

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