Monitoring your Investment Portfolio

February 22, 2012

The original idea for this post started with a rant I wrote about women not investing enough. I am now continuing in my series of Learning to Invest.

Incase you missed the first 3 parts, here they are:

  1. Researching stocks the smart way
  2. Using a Mock Investment portfolio
  3. Choosing your first stocks

When you’re learning to invest, the research doesn’t stop once the mutual funds and other assets are added to your portfolio. Instead, it’s important to regularly monitor the performance of your investment choices so that you don’t end up with a portfolio that at best wildly differs from your starting goals, and at worst, proceeds to bankrupt you in the process, too.

Here are a few key reasons why consistent maintenance prevents financial disaster:

  • It allows you to adapt quickly to a changing market.
  • Aids in the identification of under-performing investments.
  • Helps pin-point assets with a high earning potential.

The best way to monitor your investment portfolio is to establish reasonable benchmarks for comparison early on.  In addition to setting long term goals, like ensuring you have enough for your retirement fund, you will also want to throw in some short term monetary goals, as well. For example, paying off a car loan, or becoming a home owner, are both achievable short term goals.

There are three primary types of benchmarks that you will use to monitor the behavior of your investments:

  1. Peer Groups
  2. Market Indexes
  3. Personal Benchmarks

It’s important to learn how to use all three to establish the true behavior of your portfolio. After you have set your personal benchmarks, and established which market indexes are realistic to use for your individual portfolio, then the next step in learning to invest is indentifying when it’s time to cut non-performing investments loose. Although daily, weekly and monthly fluctuations are normal due to the volatile nature of the market, a fund that is no longer meeting the majority of your personal benchmarks over a pre-specified period of time is unlikely to help you reach the ultimate goal of financial freedom.

Tools that Will Help You Monitor Your Investment Portfolio

  • A well thought out financial plan. One of the best ways to ensure that your investments are on track is to draft out a financial plan that clearly lays out how much financial risk you can allow yourself to take. In addition to making the decision to sell or hold stocks easier, a clear risk assessment will help prevent getting caught up in the moment and spending too much when your assets appear to be doing well. Ideally, this should be prepared well before you start buying stocks and adding mutual funds to your portfolio.
  • TD Asset Management. If you are uncomfortable taking on the task of maintaining your portfolio alone, then you may want to consider hiring the help of a professional. For instance, the team behind TD Asset Management can not only help you set up customized goals, but they can also help you identify which assets are no longer worth pursuing. Sometimes, the best way to learn how to predict and monitor market behavior is by watching someone else with experience do it – at the very least, don’t forget to ask for advice.

Final Words on Monitoring and Maintaining your Portfolio

While it’s important to understand that your investments will constantly change, you should always keep their overall behavior under close observation. If you don’t, your portfolio may end up deviating from the financial goals you are hoping to achieve – which would undermine the entire point of learning to invest in the first place.

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  • Jai Catalano February 22, 2012 at 4:30 pm

    Well said. Keep things in view. I am actually getting things more and more in my control both work wise and finances. I am sure you guys are to credit but nonetheless it’s happening.

    • Marissa February 23, 2012 at 1:26 am

      Aww thanks. I think reading so much personal finance must be helping as well.

  • The Happy Homeowner February 22, 2012 at 4:23 pm

    This is an excellent series; I’m so happy to have found it through Yakezie. Thanks for sharing this!

    • Marissa February 23, 2012 at 1:26 am

      No problem!

  • SB @ One Cent At A Time February 23, 2012 at 4:18 am

    “if you missed first 2 parts” it should be three. Can you correct that? Its a good series you are having.

    • Marissa February 23, 2012 at 8:41 pm

      Right you are!

  • invoice financing February 24, 2012 at 6:49 am

    why i read this post with full of my interest. writer gave a great post indeed. thanks for sharing it. very informative.

    • Marissa February 26, 2012 at 3:12 am


  • Jackie February 25, 2012 at 1:58 am

    Good suggestions, especially the one about establishing reasonable benchmarks early one. You do have to have something to compare it to, and that thing should align with your goals.

    • Marissa February 26, 2012 at 3:15 am


  • Paul @ The Frugal Toad February 25, 2012 at 4:49 am

    I clicked on your link on Technorati and looks like that cleared up the cache problem, weird! Anyway, great series Marissa. I like to keep things simple and just use the S&P 500 index for comparison purposes. I have my accounts rebalance at the end of each quarter so that my allocation tracks my target.

    • Marissa February 26, 2012 at 3:14 am

      Amazing! That makes me feel better!

      And I live with Google Finance open at all times. Any thing tech related involved a lot of tech blogs, but Im a tech nerd so that may not be considered research.

  • Risk Boutique February 27, 2012 at 1:11 pm

    I find establishing and reevaluating investment goals key to long-term success. If you want to simply buy some assets and bury them in the garden, you’re unlikely to beat more observing investors who adjust to trends and use instruments such as trailing stop losses. It simply pays off to follow the market closely, but the question is how much time and attention are you ready to devote to it.