The Importance of Regularly Monitoring Your Investments
Regularly monitoring your investments is crucial to ensure their performance aligns with your financial goals. The frequency of reviews will depend on your investment duration and the type of assets you hold. For defensive assets like savings accounts and bonds, it is advisable to check for income and capital value changes when receiving statements. These assets are generally more stable and require less frequent monitoring.
On the other hand, growth assets such as property, shares, and managed funds are more volatile and should be reviewed once or twice a year. Timing these reviews around the release of semi-annual and annual reports can provide a comprehensive overview of their performance. It's important to strike a balance and avoid over-tracking, as excessive monitoring can lead to over-trading, which may hinder your long-term investment plan.
Maintaining a diversified portfolio is essential to mitigate risk, especially during market downturns. By spreading your investments across different asset classes, sectors, and geographic locations, you can minimize the impact of any single investment's poor performance. Remember to remain patient during market fluctuations and allow your investments to endure these temporary setbacks.
In addition to monitoring your investments, it's advisable to review your investment plan annually. This ensures that your goals, risk tolerance, and investment timeframe are still aligned. As your circumstances may change over time, adjusting your investment plan accordingly will help you stay on track and make informed decisions.
When monitoring specific types of investments, it's important to employ appropriate strategies. For shares, set up a watch list to track prices, dividends, and company announcements. Semi-annual and annual reports provide valuable insights into company performance. Managed funds can be monitored through annual statements, performance updates on their websites, and comparisons with benchmarks. Property investments can be tracked by reviewing sold property prices on real estate websites, monitoring housing price updates from reliable sources, and tracking auction clearance rates. Real estate investment trusts (REITs) can be monitored in a similar manner to shares.
Identifying warning signs of poor investment performance can be challenging, but certain indicators can help. Pay attention to financial and accounting problems, such as repeated errors or controversies in financial accounts. Management problems, such as frequent changes in the board or directors selling their shares, can also raise concerns. Monitoring company announcements for management changes and director holdings can provide further insights. Additionally, staying informed by monitoring regulatory bodies' publications, such as ASIC and the ASX, can highlight potential issues within a company or its reports.
Knowing when to sell your investments requires careful consideration rather than reacting hastily to price drops. Rather than panicking, take the time to evaluate your investment's fundamentals. Assess whether it still aligns with your financial goals and risk tolerance. If the investment continues to support your objectives and you are comfortable with the associated risks, it may be more prudent to hold onto it until its price recovers. Selling should be based on a thorough analysis of the investment's long-term prospects and its fit within your overall portfolio.
Source: https://moneysmart.gov.au/how-to-invest/keep-track-of-your-investments