Friday, April 1, 2011

Check your portfolio quarterly!

How often should you check your portfolio?
  I cannot count how many times my clients asked how often they should evaluate their investment portfolio.

In the past, you needed pen, paper and your monthly statement to  track your portfolio’s performance   While most interested, involved investors look at their monthly statements, few if any really know how well their investments are doing in comparison with their investment goal.;  see step one of my retirement income come plan at  

Before you decide how often to evaluate your portfolio you need to decide what you are going to measure.  With all the technology and information at our fingertips, we can get totally lost in this process.  TheMadam has distilled this to a few simple measurements.

As income is the whole point of investing the portion of your portfolio dedicated to create your monthly income needs, you need to measure it often.     Knowing the annual income your investments create is mandatory.  Even with Quicken downloads and with the analyses provided by brokers, I still have to use pen and paper to add up income.   Listed below are the sources of income that you should measure.

Covered Call premiums
Mutual Fund Capital Gains Distributions

The focus of this blog is income from stocks and bonds.  We do not cover mutual funds or rental income.  Moreover, I do not include either realized capital gains from investments you sold at a profit.  I also do not include unrealized capital gains that you would generate if you sold an investment today.

I like to measure income quarterly.  Since most companies pay dividends quarterly, and many bonds are paid semi annually, you are wasting your time to check on income more often than quarterly.  Income may vary among and between quarters but trends will emerge within a year.   

Today is the beginning of a new quarter.  You should be able to look at your brokerage statement and determine your dividend, interest, and covered call premium income for quarter one.

Save your work, write it down.  If you are facile with spreadsheets, create a spreadsheet that allows you to enter this information easily.
Part of every good plan is the evaluation step.  If you are not happy with the income created from the part of your portfolio dedicated to your cash flow strategy this is the time to make some changes.
Very Truly Yours,