Value investing is all about being in for the long game... which means that your best friend is a consistent portfolio management system.
It's easy to get caught up in the maddening excitement of staring at your investment portfolio - but too many value investors lose their steam by checking in too often and expecting to see change overnight. Either that, or the overwhelming nature of the fluctuating global markets lead you to not check in often enough, ultimately dooming your portfolio by a lack of management. As I impressed in my last blog, "trying to take short cuts, acting over-confidently or even attempting to avert loss, won’t land your bum in the butter". The best advice for saving money (and for making money) is to act consistently, and to over time understand how much time your portfolio strategy deserves.
That’s why I'm outlining this in today's blog, with a simple 2-part approach to understanding your 3D VI portfolio management style.
How to Invest in Stocks: Consistency is Key
Why Should I Have Consistent Stock Analysis?
There's no two ways around it. Consistency is key. Why? Inconsistency can lead to confusion, and make you either fall behind or jump too far ahead. Checking in irregularly usually happens as a result of lack of interest or of being overwhelmed... both of which cause panic when you snap back to reality and, in most cases, attempt to avert your losses. But, a consistent management approach allows you to clearly review your portfolio in a day-to-day, week-to-week or month-to-month comparison. Allowing you the space to breathe and make steady, informed decisions.
How Should I Be Consistent?
Your review management system should be based on your individual investor’s profile. It comes down to the specifics of your portfolio, and what it needs in order to function at its best capacity. In STRIDE's Running Your Portfolio playbook, they explain it like this: "Long-term investments require less frequent reviews, and short-term investments require more frequent reviews, but you might also need to alter your review management based on market fluctuations (for instance, in the wake of Brexit, you would possibly want to review your portfolio more regularly if your portfolio isn’t diversified and is dominated by UK stocks)". The goal is to be consistent and fall into a routine that you can reflect on. STRIDE outlines the basics of a daily, weekly, and monthly approach below.
We recommend having a 5 minute daily review to ensure there are no specific events that may change the landscape and have a big impact on your portfolio.
We recommend you set 30 mins aside to make / organise trades on your portfolio, add all your dividends and do a small review of the week.
We recommend setting an hour or two aside per month to do an in-depth review. How is your portfolio performing? Where is your income coming from? Have you diversified enough? Is there enough money for another slice? Is it all working as you thought?
When in doubt, don't stress about getting your portfolio management system exactly right... rather just be consistent and review the effectiveness of your system as time goes by. If you want to know more about running your portfolio, then download our playbook, Practical Guide to Value Investing: Running Your Portfolio, below.