Monitoring your portfolio

One of the great benefits of running your own portfolio is that you can monitor it as often as you like.  The accessibility of information and the ease with which one can trade using the internet is both good and bad. If you have access to the internet, there are many websites that allow you to monitor one or more portfolios.  If your investments are held across a number of brokers, you can aggregate your holdings into ‘virtual’ portfolios and monitor them easily.  However, seeing the value of your investments fluctuating minute by minute can be addictive and may give you the urge to trade more frequently.  Over-trading will eat into your returns – constantly buying and selling stocks in your portfolio (referred to as ‘churning’) in an attempt to boost returns is rarely worthwhile.  Indeed, one of the world’s greatest investors, Warren Buffett, famously said that his favourite investment was one that he never sold.

Having said this, you should review your portfolio periodically to check that it is still balanced and aligned with your investment objectives.  Use the review process to:

1)      consider ‘top-slicing’ holdings that have outperformed to re-balance the portfolio

2)      review and/or amend stop-losses if appropriate

3)      ‘weed out’/replace poor performers

4)      identify potential new holdings

5)      consider the re-investment of the cash element of your portfolio

The frequency you review your portfolio, or parts of your portfolio, could vary.  For example, you may wish to keep a closer watch on more volatile, speculative, individual holdings of smaller company stocks than you would only your more stable, longer-term, core holdings. A re-balancing of your portfolio in its entirety with consideration to broad asset allocation is probably only necessary on an annual basis.

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