Tuesday, 8 May 2012

Investing in Shares: How often should I check the value of shares in my portfolio?

In this post I thought I would answer the question - how often should I check the value of my shares and the portfolio.  Most people when they start investing in shares feel the need to check how their investment is going every day.  This, however, is not what you should be doing.

One of the hardest psychological aspects about investing in shares is that the price is always available.  It create the temptation to look at the share price to see how we are doing.  If you compare this to other investments (such as property) which are illiquid the temptation to constantly look at the price is just not there because the information is not there.

The answer then is to only check the value of the share portfolio when you are reaching a decision point. 
  • If you have bought the shares for a good price (having done all the necessary analysis and valuations) and you know what you think the shares are worth then you only need to know whether the shares are getting close to this 'fair value' that you have ascribed to it.  There are plenty of stock broking programmes that will send you an email / sms alert when the shares hit certain prices and it is very easy to set up. 
  • The other time you should check the price is when you are updating your valuation for results / announcements or any other new information that comes to the market - this is the time that you will discover if you have paid too much for your shares and if they are trading above your new valuation then it is time to sell.
I check my share prices about once a month when I go to update my net worth for this blog and whenever I am updating my valuations for the shares I own.  I found that once I have owned a share for a significant period of time (i.e. more than about 18 months) the temptation to check the share price almost vanishes.  This is not great either as you need to be aware of whether it is time to sell or even perhaps add more to your portfolio. 

The advantage of having a system of when to check the value of your stocks is that it removes much of the emotion involved in investing.  You don't really care what the market is doing because you're not checking it constantly and this allows you to be a more patient and successful investor.

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