Monday, October 23, 2006

* Regular review points -- consistent and regular examination of holdings and performance

This is an important aspect. Note -- regular reviews do *not* mean regular trades. In fact, most reviews should probably not result in any trades at all. Reasoning about buying and selling should be independent of the reviews. The best time to buy and/or sell may not be on the day you do your review, but will come around whenever the market conditions are right. The purpose of the review isn't to trigger trades, but to keep abreast of the performance of your portfolio so that when the time is right, it is also recognised.

The easiest kind of regular review is the "buy-and-weed" approach. You plant a bunch of shares, and then weed out those which are not growing well, or perhaps which have already bloomed this season and are ready for rotation. Reviewing even a small portfolio can be very time-consuming to do. I find myself monitoring the share price of the companies I am invested in daily, and have also signed myself up to a news scanning service which emails me around 15 articles a day based on the share codes I have set up. Most of these I ignore -- I probably skim read about one article per day as the rest are minor updates and not of major interest.

Having some regular accounting of ones performance and decisions is well worth it. It removed the rose-coloured glasses of hindsight.

When starting out as I am, I found it useful to have a short checklist of perhaps 5 metrics to "grade" each share against. On that checklist could be:
* The share price on the day and at the time of last review
* A Good/Bad estimate of recent company news
* Whether you have considered buying or selling that share, and the price at the time of consideration
* What the share analysis (usually available from your e-broker) was on the day and at time of last review
* How you feel about the share

If it is difficult to do this, consider just a few shares at a time. Make sure you hit each one at least once every 3 months. This, in concert with a daily glance at the share prices, will help you notice changing market conditions.

Unfortunately, I don't know of much good software to help with this endeavour. The best tools are a workbook and writing stick. Compiling your own data in this way may seem tedious in the modern age, but there is no elegant computer solution that I know of. The exercise of manually creating the tables etc will also focus the attention in a way that using an automated application may not, so it's not all downsides.

After a while, see how each of your dot points looks with hindsight.

Cheers,
-MP

3 Comments:

Anonymous Anonymous said...

Splendid blog, when you find time

5/17/2007 04:18:00 AM  
Anonymous Anonymous said...

do you know about this company

http://www.austinexploration.com/Kentucky/Flash/Launch.htm

Seems interesting and they are trading low at the moment

2/13/2008 01:17:00 PM  
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