My Monthly Investment Review
The 10-Minute Check-In: A Simple Way to Monitor Your Investments
I love being retired. I am out of the wealth management business after 36 years. I no longer manage anyone’s investment portfolio, including my own.
I would much rather focus on what matters most to me—my closest relationships, my health, my spiritual journey, writing this blog, and having fun.
Still, I am not comfortable just ignoring my investments for months on end. I worry that something might be amiss in my portfolio. I don’t want to be caught with a surprise tax bill on April 15. I want to keep an eye out for theft or errors.
How do I check my portfolio, get the information I need, and avoid getting lost in the weeds? It takes me 10 minutes once a month. My contention is that is all the time anyone needs to monitor their investments prudently.
The first step is to obtain a consolidated statement from your custodian, online or on paper, depending on what you prefer.
Custodians are the companies that hold your assets. Fidelity, Schwab, Raymond James, and Merril Lynch are some common examples. Between our IRA’s, Rollover IRA’s, Roth IRA’s, accounts in my name, and accounts in my wife’s name, we have lots of accounts. My custodian sends me a statement each month that includes all of our accounts. Best of all, this statement starts with several summary pages that provide the key information I need.
Here’s my step-by-step process:
Is Someone Stealing From Me?
My custodian reports on additions and subtractions from the portfolio for the month. The net difference is the amount of money that has left the portfolio during that period. If this number is larger than I expected, I look at my statements, account by account, to figure out where the money went. I may discover, for example, that I had forgotten about a withdrawal to pay for a non-recurring expense like travel. If I can’t quickly figure out where the money went, I contact the custodian immediately. Thankfully, this has never happened.
Am I Making or Losing Money?
In the summary statement, the custodian reports on my change in investment value for the month and for the year-to-date (YTD).
When the market is up sharply, I may look for the chance to trim my equity holdings and add to my cash and bond portfolio. I may also ask my financial advisor to look for opportunities to contribute appreciated stock to my donor-advised charitable account. (If you give money to charity each year and don’t know about donor-advised accounts, ask your advisor if this efficient tax-saving idea is appropriate for you.)
If the market is swooning, I may ask my advisor to examine the portfolio for tax-loss harvesting opportunities. I have an excellent advisor, and he is always one step ahead of me when I make this call. Not all advisors are as diligent.
Will I Be Surprised at Tax Time?
The summary of the consolidated statement shows my YTD taxable income and my short term and long term capital gains and losses. I try to send the information quarterly to my accountant. He lets me know how much I should set aside for future tax payments, and tells me how much to pay in quarterly tax payments to avoid IRS interest and penalty charges.
My experience is that people spend too much time or too little time thinking about their portfolio. I had clients who invested an inordinate amount of time and energy focusing on their investments. They think they can anticipate the next bear market and get out before it arrives, or predict the next bull market and get in before stock prices soar. In both cases, they are mistaken.
No one can accurately predict the short term movement of the market or an individual stock.
Other investors, who dread reviewing their investments and feel financially incompetent, rarely if ever look at statements from custodians. Besides the guilt this engenders, they remain insecure about their financial status, may end up with an unexpected tax liability that could have been avoided, are prey to financial malfeasance—plus they lose the opportunity to take advantage of bear markets.
For me, the 10-minute monthly investment review works incredibly well. I am likely to discover if someone is stealing from me. I stay on top of my tax liability. If the market is making a major move upward, I may take the opportunity to replenish my cash and bond portfolio, and I may add to my charitable account in a tax-efficient manner.
My program is not perfect. Sure, if I spent more time reviewing my portfolio, I might discover new opportunities. My vigilance once made money for my wealth management clients. But spending extra time thinking about my portfolio would mean less time to spend writing my blog, practicing my faith, staying healthy, and hanging out with friends.
In the next blog, I’m going to tackle the issue of annual review of your investment portfolio and tell you some good questions to ask your financial advisor. If that conversation typically revolves around how your investments did last year and how they’re likely to do this year, you’re wasting your time!
Until our next conversation,
David
Small Steps & Worthy Questions
Would a focused portfolio review process once a month allow you to worry less about your investments, and focus your attention on more enjoyable and productive activities?
Do you feel guilty about never looking at your portfolio? Might a monthly review process alleviate your guilt?
If you’re not receiving a consolidated statement showing all of your accounts, contact your custodian right away and make the request. Paper or online, your preference.
Great advice, even for those who aren't expert in financial management (as you are). For us, the monthly review might be 20 minutes to account for slower uptake. But the principle is the same: spend enough time to check in and confirm things remain on track; then check out, instead of obsessing, and focus on what matters most--since money is just a tool to enable what matters most.