Day #176: Portfolio Monitoring

So it turns out that I have the flu. If that weren’t bad enough, apparently I’m highly contagious and have a seriously weakened immune system, so I can’t leave the house for a week. Someone just shoot me now. Doesn’t my doctor know that I have Kohl’s cash expiring on Saturday?! Oh well. Thank goodness for the Internet!

Monitoring My Portfolio

Now, back to work! I’m finally at the last stage of my investment policy statement, and that involves outlining my portfolio monitoring procedures. The biggest question I need to answer is how often will I monitor my portfolio? I don’t want this to be a time-consuming venture given the multitude of other projects that I have going on. If I enter stop orders immediately after purchasing my securities, that will keep me from having to monitor the portfolio so frequently. That way, as soon as my losses hit a certain level, a sell order will automatically be executed. If I manage my portfolio this way, the worst that could happen is that there are stretches of time where I am underinvested. That is, it is possible that I buy stocks that drop in price right away and my automatic sell orders kick in. Then, in the worst case, my portfolio will be invested in all cash exactly as it is now. I can live with that. I will review my portfolio once a month. At that time, I will compare investment performance to the benchmarks I have set, replace any holdings that were sold due to underperformance and review my existing holdings to ensure that they still meet my selection criteria. Hopefully I can get all that done in just an hour or two each month.

Performance
I’ve already outlined my loss limits and performance benchmarks in the executive summary section of my investment policy statement, so I will review my portfolio performance according to those guidelines at the end of each month. Essentially, I want to compare the performance of my portfolio to the overall market. I don’t expect to consistently beat the market, but on average, I’d like to earn a return equivalent to the returns on the S&P 500. I know, I know, if all I want are market returns, then why not buy an index fund that tracks the market? That would be a great choice – particularly for someone who does not have the time or expertise to actively manage a stock portfolio. Personally, I find passive investing a little boring and thought I could carve out a little time to have fun with this.

Putting it All Together
I feel like I’ve put together a decent investment policy statement. Tomorrow, I’ll cut and paste in order to put all of the pieces together. It was important to me to get this done now. I want to start the New Year off right with a plan for how to manage my self-directed IRA. Hopefully, I’ll be able to make my first purchase on January 3rd!

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