Reviewing your Investments

I have to confess to being a bit of a strategy nerd. For as long as I can remember, the idea of having a plan and working towards a goal has really excited me. I love the process of building the strategy and I love looking back and reviewing my progress towards the goals I’ve set myself. When it comes to reviewing my investments, I have four different ’reviews’ that I undertake. In this article, I’ll cover these in brief detail and provide some insight into why they work for me.

The Daily Review

Pretty much without exception, I keep a daily watch on any news or updates coming from the companies I invest in. I log my details with their investor relations team and use the ’news’ tab on Stockopedia to review releases related to my investments. Sometimes, these are full-scale annual reports, other times they’re press releases or trading updates, sometimes they nothing more than a mention in a trade publication or coverage of a competitor. Depending on the volume of updates, I usually read them all but am not obsessed with it – instead, my Daily Review is about keeping on top of the markets and my investments and takes anywhere between fifteen minutes to an hour a day.

The Monthly Review

Once a month, I make a buy/sell decision on the companies that I have been researching or hold, and run my benchmarking exercise against my chosen funds. This is usually a very quick exercise as the majority of my research has been done and I already know my target price. It’s a key pillar of my methodical approach to investing and helps me to make the most important decisions in a calm and structured way. If you feel like reviewing your investments on a daily basis is too much work, this is a good ’half way house’ to help you keep your finger on the pulse.

The Half-Year Review

Every six months, I produce a report covering how my portfolio has performed, what decisions have been made, and how this relates to our family’s finances. I find this a very useful exercise to ensure I’m really on top of my portfolio as I have to be able to easily and concisely explain what has happened and what I will be doing about it. This is an extremely important review which provides insight into my performance and the key thinking behind my investment decision making. Essentially, I could be ’put on review’ after one of these reports should a member of the family not be satisfied with my performance or decision-making over the previous period.

The Annual Review

My Annual Review is produced around Christmas and includes a detailed review of every position in my portfolio, my thoughts on the economy and my progress against detailed KPIs including portfolio gains/losses, risk management, turnover, costs and adherence to strategy. I spend upwards of 100 hours testing my portfolio, considering the outcomes of alternative decisions and testing whether my overall strategy is performing ’as expected’. In the event that it isn’t, I have to clearly and logically set out exactly why it hasn’t and why I think the situation will change over the next 12 months.

Trust, but Verify

Reviewing your investments isn’t just about monitoring performance, it’s about testing my assumptions and trying to find weaknesses or areas for improvement in your portfolio performance. I have met more than one investor that dogmatically stuck to a strategy during months, then years of underperformance – refusing to adapt because they felt that their dogmatic approach was ’the best’.

By contrast, I’ve learnt that there are a great many ways to skin a cat. Some ’traders’ I know make far greater profits than me with far less capital; I just don’t believe I could replicate their success or that it will be sustainable over the long-term. Likewise, although I describe myself as more of a ’buy and hold’ investor, I’ve realised that my idea of ’hold’ can vary dramatically depending on overall market conditions and whether my initial investment thesis holds up over time.

For example, if cars were banned tomorrow – permanently and irrevocably – it wouldn’t matter how much market share a listed car maker had, the value of an investment in them would change dramatically overnight. Maybe there would be a new thesis based on the liquidation value of the company; maybe the company would be able to pivot to a new industry; or maybe, the company would simply be worth less as a result of the new regulations.

I don’t believe a strategy is a static thing; something to be chiselled into a stone tablet and never changed for fear of blaspheming against the market gods. Instead, your strategy should reflect new ideas and concepts you’ve learned and change with the times.

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