Without keeping score, it would make no sense as to how your investment portfolio is performing.
“Not everything that can be counted counts, and not everything that counts can be counted.”
Keeping score also means that you are treating your investment activities like a business. And like all good businesses, having measures and targets ensure that those businesses are successful. And we should treat our investing activities like our business.
For instance, let’s take a look at the stock broking industry. I have been a share investor since I was at University (and being as ancient as my 9yo son says I am, that is a long time). Yet, most stock brokers will not give you a score-card to tell you how your portfolio is performing. Perhaps it serves to show the shortcomings of their recommendations – but whatever the reason you need to measure how your money is performing.
If you are serious about being successful as an investor, you need to set up your own score card. I have a score card that where I measure the performance of my share portfolios quarterly, and my property investments annually.
To measure shares, we use the closing prices at the end of the quarter, and for property I get a Residex Comparative Market Analysis (it is not exact – but good enough for my purposes) at the end of each financial year as a guide.
Once you set up a score card, you will also start to set up targets for yourself. For instance, this financial year, my self-imposed target for my super fund is 16%pa.
Why 16%? This is what we need for our superannuation fund to achieve what we need for a very comfortable retirement. The actual target will differ depending on what you need to retire on, and how much time you have till retirement.
At the moment we are tracking at 12%pa, which means that I will have to either:
- Take some more risks to see if I can make up the difference over the next 3 quarters, or
- Sell off the loss makers now and make some adjustments, or
- Do nothing – as this is only a review and we are in it for the long term
The key is that the portfolios are being reviewed, and it is only by keeping score that you can keep track of what the investment portfolios are doing.
My advice is to start up your own scorecards, and keep monitoring your investment portfolios, so that you can see whether you need to make any adjustments or not. And treat your investment activities like you are a fund manager running a business.
Contact us if you want to know more about how our credit advice can help you build your investment property portfolio.