How Closely Should I Monitor My Investments?

Investing is a long-term endeavor, and while it’s important to stay informed about your portfolio’s performance, obsessively checking your investments can lead to unnecessary stress and impulsive decisions. So, how closely should you monitor your investments to ensure they are on track without overdoing it? Here’s a balanced approach to keep you informed and composed (even in tricky times!).

Set a Regular Review Schedule

Instead of checking your portfolio daily or even weekly, set a regular review schedule. Quarterly reviews are typically sufficient for most investors. This allows you to stay informed about your investments’ performance without getting bogged down by short-term market fluctuations.

Understand the Purpose of Monitoring

Monitoring your investments serves several key purposes:

1. Performance Tracking: Ensure your investments are meeting your expected returns and are aligned with your financial goals.
2. Rebalancing: Adjust your portfolio to maintain your desired asset allocation, especially after significant market movements.
3. Staying Informed: Keep abreast of changes in the market, economy, or individual investments that might impact your portfolio.

Key Areas to Monitor

When you do review your investments, focus on these key areas:

1. Performance vs. Benchmarks: Compare your portfolio’s performance to relevant benchmarks to determine if it’s on track. For instance, if you’re invested in a broad stock market index fund, compare its returns to those of the overall market index.
2. Asset Allocation: Ensure your investments remain diversified according to your risk tolerance and financial goals. If certain assets have significantly outperformed or underperformed, you might need to rebalance.
3. Individual Investment Health: Keep an eye on any significant changes in the individual investments you hold, such as management changes in mutual funds or major shifts in the business strategy of companies whose stocks you own.

Responding to Market Changes

Market volatility is a normal part of investing. It’s crucial to stay calm and avoid making impulsive decisions based on short-term market movements. Remember, your investment strategy should be designed with your long-term goals in mind, and reacting to every market dip can derail your progress.

When to Take Action

Certain events or conditions might warrant a closer look and potentially adjusting your portfolio:

1. Life Changes: Significant personal changes such as getting married, having a child, changing jobs, or approaching retirement may necessitate adjustments to your investment strategy.
2. Reaching Financial Milestones: Achieving certain financial goals or milestones might prompt a reassessment of your portfolio to align with new objectives.
3. Major Market Events: Significant economic or market changes might require you to review and potentially rebalance your portfolio, especially if your asset allocation has shifted significantly.

Tools to Help You Monitor

Utilise tools and resources to streamline the monitoring process:

1. Investment Platforms: Many online brokerage accounts and robo-advisors offer dashboards and reports that make it easy to track your portfolio’s performance and allocation.
2. Financial News and Updates: Stay informed about market trends and news through reputable financial news sources, but avoid getting overwhelmed by the day-to-day noise.
3. Automated Alerts: Set up automated alerts for significant changes in your portfolio or individual investments, so you’re notified when something requires your attention.

Conclusion

Monitoring your investments is essential, but it doesn’t have to be an all-consuming task. Set a regular review schedule, focus on key performance indicators, and avoid reacting impulsively to short-term market changes. By staying informed and maintaining a long-term perspective, you can ensure your investments are on track to meet your financial goals while minimising stress and maintaining a balanced approach to investing.