Monitoring the stock market return for your portfolio is a method of seeing which investments are doing well, and which you should cut out of your portfolio. Historically the return has been around 10% for the right investors, but in reality you can see as little as 6% or less.
It’s hard to monitor and compare stocks you have because of the length of time in which you hold them. It’s tough to compare the return of a 30-year old stock and compare it to the return of a stock that has been active in your portfolio for a year. Try to find a common metric that you can measure both which, such as the average for a specific year or future projections.
You can also compare your stock market return to the industry average for your stock’s general category. For instance, if you invested in an oil company, you should compare your return to the return that the industry as a whole experienced for the fiscal year. If you noticed that you are drastically below the average, it’s time you looked elsewhere.
Balancing your stock portfolio too often is a bad idea. Even on a monthly basis can be too much, since the stock won’t have time to fluctuate along with the market. It’s best to do an annual review if you can, but it is understandable if you need to urgently drop a stock that is tanking your portfolio. Likewise, you may want to bolster a stock that has a high chance of improving your profits.
Remember than any stock is going to go up and down in worth no matter what you do. It’s only fair that you tank some down turns in profitability and discredit them. All of the large companies today have had their own decline in profits at one point or another, and yet if early stock holders still own a stake of their company, they are essentially wealthy as can be. Knowing when to sell is not so much of a game of picking a date, but rather waiting for your wealth to maximize.
Don’t forget that inflation will play a role in valuing the stocks in your portfolio. Inflation from one year to another can throw off your measurements and any projections by a good deal. This is another reason why it’s best to value your stocks at the end of the year, so you can get a good idea on how inflation has played its role in your portfolio. The room for error will be reduced drastically.
In Conclusion
Do all the research you need to make your portfolio more impressive, but remember that there is such a thing as too much research. In the end the market is unpredictable sometimes, no matter who you are, and research won’t do a thing to help.
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