Monitoring Investments

The motorcycle advertisement that went, “Fill it, shut it, forget it”? That sort of thing is all right for bikes, but the best investment strategy, as BN found out recently. He had bought some shares for around Rs 50,000 on a friend’s recommendation a few years ago. Having made his investment in good faith, he proceeded to forget all about it. Recently, he checked for the stock and was shocked to find that the current value of investment is almost half of what he had paid.

When he phoned his friend about it, he learned that the price had, in fact, gone up last year. His savvy friend had sold his own shares at that time, but did not realize that BN had held on to the same stock. BN had completely forgotten about the investment and never bothered to check about the price or follow up on the company was doing.

Something similar happened to another investor P. She also bought some stocks on tips from a friend who dabbled in the stock market, but didn’t track the company’s fortunes for next three years. When she got to know that she lost almost 80% of her money. It was an obscure company, so it was difficult to know what was happening to it. Reviewing ones investments at regular intervals is a must. In fact fund managers of banks or finance companies regularly update clients about their portfolio, and even call them if there is any serious development. In fact, apart from investments, one should also periodically review his/her insurance needs.

If one is investing in stocks, he or she should follow them very closely. Mutual funds don’t require that kind of monitoring, although one should update about the quarterly performance of his/her mutual fund investments and must know how they are performing with regards to their peers. A review of investments and insurance needs from time to time will help one to achieve his financial goals.

If one is directly investing in stocks, he/she should be prepared to spend some time everyday monitoring them. This is because any negative news about a company or the sector it operated in could affect the share price adversely. Unless one is investing in a frontline stock like Reliance or Infosys, the investor can’t be complacent about his/her investment. One should be familiar with all the news that could have an impact on his/her investment.

The wealth manager advocates even more caution saying that not keeping tab on blue chip stocks may not be such a good idea. There is no guarantee that a great company will not flounder. If one doesn’t have the time to monitor his/her investment closely, then he can assign the job to someone else. Since most of the investors don’t have a huge amount of money to hire a portfolio manager, we may have only as fund manager. Can we trust the manager to do the job and sit back? To a great extent, yes But it’s still a good idea to keep track of the performance

One has to closely watch it if one is investing in a thematic a sector scheme. However, it is not recommended hopping from one fund to another on the basis of short term under performance. Every scheme has an investment philosophy. One should keep it in mind while assessing the performance.

Another area which needs constant review (most experts recommend yearly reviews) is insurance cover. Experts point out that our insurance needs may change with changes in our incomes, advancing years among other things. One would have bought a life insurance cover of Rs 10 lakh when he just got married, but the cover may be inadequate after one has kids. Alternatively, ones lifestyle may have changed with an increase in salary. That also calls for additional cover. One should also consider having maximum health insurance cover as one crosses 40. The chances of one needing medical treatment go up as one grows old..

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