Investment monitoring is an ongoing process of evaluating the fundamentals of underlying businesses and the performance of your investment portfolio. A disciplined approach to portfolio monitoring is essential. It’s not just about logging into your brokerage account and checking stock prices. It’s about knowing what you own.

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What is Portfolio Monitoring?

Portfolio monitoring is a crucial aspect of portfolio management. When done systematically and with discipline, it can enhance performance by keeping you informed about your investments. However, there is a thin line between being vigilant and becoming obsessed. Constantly watching the markets can lead to impulsive decision-making driven by emotions.

A passive investing approach may require less monitoring than an active strategy. If you hold a few index funds and adopt a simple strategy, the flow of information and price movements of an index fund is generally minimal compared to individual securities. As an active investor in individual securities, gone are the days when you could buy-and-hold or set and forget without checking in regularly. This leads to the question of when to check in, much like the question of when to rebalance.

We will discuss a few important ideas to help you understand the best way to monitor a portfolio. These ideas have little to do with checking price movements.

Why is Monitoring your portfolio important?

Once you have built your stock portfolio, it is crucial to keep an eye on it. Although some people suggest buying stocks and forgetting about them, this is not a wise approach. Every investor I know monitors their investments. You must keep track of the performance and stay up to date with the latest information.

Thanks to technological advancements, especially in the investment world, information is now available instantaneously. Markets are more reactive and volatile, and there is an abundance of information that investors need to keep up with regarding their holdings.

Buy into a company because you want to own it, not because you want the stock to go up.”

Warren Buffett

If you don’t monitor your portfolio, you might miss out on valuable information that can help you make better buy and sell decisions. Neglecting your portfolio can also mean ignoring certain rebalancing requirements. Monitoring can help you maximize opportunities and minimize risks by keeping you aware of what is going on.

This is not about timing the market or making decisions based on stock price movements. It’s about managing your investment portfolio like a professional. I personally know and want to continue knowing everything there is to know about every investment I own. It’s like portfolio “maintenance,” similar to car maintenance or house maintenance. Portfolio monitoring is a form of maintenance.

What is the best approach to portfolio monitoring?

You need to actively review the information about the businesses you own and your overall target asset allocation. Your goal is to determine if they continue to align with your strategy and meet your objectives. Note that there is no one-size-fits-all approach to portfolio monitoring.

As an active investor, you cannot base your monitoring periods on a calendar-based approach. Instead, you need to monitor your investments when new information becomes available. This could mean on a quarterly, weekly, or even daily basis. Investors must be aware of cracks in the Thesis.

When you build a portfolio of individual companies, it’s essential to stay informed of every announcement, alert, quarterly update, financial report, and any news that surfaces. It may sound extreme, but it’s necessary even for stable, long-term quality companies.

Don’t assume that every piece of new information is helpful. The majority of company news and announcements are pointless. However, you must filter and sift through them to identify useful information.

If you’re a micro-cap and small-cap investor, news flow and monitoring are critical, probably the most important aspect. Things change rapidly, and you need to keep your finger on the pulse. Rather than monitoring your investments a certain number of times, monitor when new information comes to light, and make adjustments based on your interpretation of that information.

One aspect of portfolio monitoring is the comparison of new information to your Investment Thesis. I’m always looking at the evolving fundamentals to look for gaps in my thesis and checklist.

Some tips to help in portfolio monitoring.

I’ve outlined a few pointers below to help with monitoring your portfolio. From a performance perspective, rebalancing plays an important role in keeping the overall strategy in line. As we are focused on active stock selection, most of the tips are aligned around individual holdings. I believe that monitoring and managing the underlying holdings in part contributes to the performance.

It is my opinion that investors should remain focused on buying right, staying in tune with the companies they own as opposed to competing against benchmarks and portfolio performance metrics each year. If you focus on the process of finding the right opportunities and monitoring them, then that takes care of portfolio returns.

In property investment, the phrase was always “you make your money when you buy, not when you sell”. This stands true in equities as well. If you’ve done the first part right the returns will follow. This is why portfolio monitoring to me is about understanding your holdings in and out.

Portfolio Monitoring can be broken down into two segments, the underlying securities that make up the portfolio and the entire portfolio strategy set out in your Investment strategy. The constant balance of monitoring will fall between making sure you are aware of the developments within the individual companies that sit within a portfolio, and the overall portfolio from a performance perspective. This could be related to asset allocation, rebalancing, and performance with the focus on ensuring the portfolio is tracking in line with your risk, time horizon and financial goals.

Ensure you are up to date with your company.

Monitor the news flows of your holdings. If there are chat rooms, blogs, and certain PR or media articles, monitor them all. Set alerts to make the flow of information easy to obtain and filter. The first thing is to subscribe to the company’s investor relations. This ensures you are receiving new information as it surfaces.

If there is a new article, headline, or anything that relates to your company having automatic alerts creates a systematic approach to portfolio monitoring. This means you are monitoring when new information comes to light.

Read the quarterly finance updates and all announcements.

Read all the quarterly updates, company announcements, annual reports and filings. In line with the above, subscribe whether through your broker or directly with the company. Read all the information that comes out. It does not take long, apart from the quarterly and the annual report most of the regular announcements are not relevant. However, filter through them. You start to get a very good idea of holdings, who is buying, who is selling, insider movements, and management movements.

I want to read information to see if management is shifting around, changes in auditor, dilution of shares, changes in strategy, and who is accumulating i.e. are funds starting to divest or invest. Look att eh financials, revenue, customer growth all the key metrics to ensure the company is tracking in line with expectations.

Keep an eye on the industry and competitors.

If there are known competitors, track them. See what movements they have, especially if they are public. Keep an eye on the companies that could dethrone your holding. Keep up to date with the industry and sector. You want to understand any headwinds or tailwinds, and where is the sector heading. Look at growth projections, and monitor any reports about the overall target audience your company is in.

Understanding the greater industry your company is in can help to cross-check company information with growth prospects. If industry reports are stating the industry is facing issues, pay attention. Monitor trends within an industry. All of this is aimed at giving investors knowledge, and the ability to know their businesses inside and out.

Monitor shareholding volume.

Whether it is shareholder dilution, insiders buying and selling, funds accumulating or derisking or private investors building a majority stake. Know the volume and momentum of your holdings. Understanding shareholder movements as well as volume helps to see where the stock is in its discovery stage.

You also want to know how management is using its equity. Are they diluting shareholders? Are they increasing stock-based compensation? I pay a lot of attention to the movements of shares and shareholding.

Watch for deteriorating fundamentals and Thesis Break.

In your Investment Thesis, you would have (should have) laid out bear and bull cases. All the wonderful things about your company and all the risks your company could face. This is why in the investment process building out a worst-case scenario can help in understanding what to monitor. These risks are identified up front. This gives you direction on what to observe.

The risks could be from a competitor, an expansion in a new region or a new product and service. Whatever risks you identified in the research and due diligence as well as your checklist, you need to keep an eye on. Look for changes in the fundamentals and deteriorating traits within the business.

Monitor the performance metrics to track the company.

Every company you own should have a key metric to measure growth. This is often laid out in your thesis and also by the company. It could be subscriber growth, acquisitions, users, downloads, or customer spending, find the metric and monitor it.

This is an important one to monitor. If the company says that customer downloads are the most important metric of performance then that is what you want to monitor. This can tie back into studying competitors and industry trends. If there is a total addressable market and market share outlined then monitor it. See how it is evolving.

Observe your target asset allocation to know whether to rebalance.

Moving onto portfolio management aspects of monitoring. Monitor the target asset allocation of your holdings. Rebalancing only when the portfolio is out of balance. This could be by setting auto alerts or periodic check-ins. Monitor for drifting assets that impact the allocation strategy. If individual holdings start to diverge from the thesis and impact the asset allocation, monitor it regularly, don’t make rash decisions, monitor it and look for sell signs.

What am I looking for when monitoring my holdings?

For me, I am following everything I have said above. One of the keys is tracking key performance indicators of the business. I also am tracking the qualities that drew me to the business to begin with, whether it was the high returns on capital, profit margins, or a company growing into an industry I believe has a big future.

If a company solves a problem, I want to ensure it can continue to solve that problem. As an entrepreneur, one area I look at is disruption within an industry that could upheave my holdings. So paying close attention especially if investing in companies within the tech sector.

We are living in a fast-paced world, and so I don’t believe you can set and forget anymore. Whilst you may invest in a business with the right fundamentals and all the qualities that should be recognised, you can still have a great business and terrible stock.

At the smaller end of the market, companies can be majorly impacted by factors outside of the underlying business. So I am always observant, and vigilant to look for signs I should exit to preserve capital or signs to load up because my conviction is growing.

I may go months without monitoring because there is little news flow then it could all come in at once and I spend weeks sifting through it all. When my alerts and system is triggered, I go to work.

This also explains a little about why I am a conviction and concentrated investor. I want to know a lot about my holdings and I find it hard to be very in tune with a lot of companies at once. I can monitor in a disciplined way partly because I don’t have a huge portfolio of positions.

In Summary…

Portfolio Monitoring helps you to know the heartbeat of your holdings and portfolio. You do start to see how these businesses move, the factors that impact them and start to see how Mr Market can cause huge gyrations in the stock price.

I think the idea of portfolio monitoring should be based on having an objective in mind. This can help to avoid unnecessary checking off the stock prices which leads to reactions on factors that may not impact the long-term direction of the company. So have a goal and objective, I am monitoring to see if X, Y, and Z are still intact. Know what to monitor whether a company metric or overall portfolio returns.

Just like the idea of knowing what you own, know what you want to monitor. I know the lure of wanting to monitor daily NOT based on any strategy but to see if the price was up or down. Over the long haul this does contribute to anxiety and distracts you from the bigger picture.

No matter what you’re investing in, keeping track of your investment portfolio is just prudent investing. I bring the idea home once again, with the reference to the many wealthy investors I know. I can ask them all at any time of day, what’s your investment in “such and such” up to. They will tell me every little detail because they monitor their holdings.