Blind To Your Future Net Worth? 6 Keys To Portfolio Tracking

ThinkstockPhotos-471168138-058860-editedThere are two kinds of investors: blind investors and informed investors. The former type carries far more stress. With years and years of necessary saving, knowing what your future net worth must be and how your investments are tracking toward that goal is critical.

Investors who can ask, “Am I on track for retirement?” and answer definitively are much more likely to not only reach their long-term financial goals, but also get there without undue anxiety.

Portfolio tracking is essential to achieving both of these outcomes. But, what are the keys to soundly tracking your current and future net worth? 

1. Remember The Big Picture

Evaluating your portfolio, finances and goals is important, but you don’t want to over-track or constantly adjust your investments. The big picture is very long term. Evaluating your current and future net worth on a monthly, quarterly or annual basis is more than enough. The market is going to endure short-term volatility. There is no need to stress over daily market movement.

The convenience of portfolio tracking apps and software should help to relieve your anxiety, not foster it. Investors make mistakes when they think too short term and scare themselves into making changes to their portfolio. Don’t overlook the bigger picture. Wealth grows slowly and over time. 

2. Follow Through

When it comes to tracking your wealth, although you may have good intentions, it is all for naught if you don’t follow through. Some methods of portfolio tracking might eventually require a lot of effort. As your portfolio grows, you may accumulate more investment accounts, and as life becomes more hectic, it’s easy to become overwhelmed with the responsibility of monitoring your investments. There are ways to bring efficiency to tracking your portfolio, but you must be willing to follow through. 

3. Communicate With Your Advisor

If you’re tracking your net worth and everything looks good, there may be little need to check in with your financial advisor. It’s still a good idea to maintain open lines of communication with him or her, and you definitely want to talk to your advisor if your targeted future net worth is coming into question. You also want your advisor to periodically monitor your portfolio’s progress. A financial advisor has a responsibility to evaluate your investments and ensure progress toward your financial goals. 

4. Reevaluate Your Goals Annually

The main problem for investors is not so much that they aren’t tracking their net worth accurately, but that they aren’t tracking it frequently enough. You should benchmark your progress toward your goals on a monthly or quarterly basis. Are you still on track? Do you need to reevaluate your asset allocation? Do you need to change your saving habits?

Just as important is taking the time to reevaluate your goals. Have the underlying assumptions that led you to determine your goals changed? How has your situation evolved since you created your goal? Did you get a new job? Did you move across the country? Did you have another child? Do your original goals still apply to your life at present?

5. Break Down Long-Term Goals Into Short-Term Objectives

If you have many financial milestones – buying a home, having children, sending them to college – breaking your goals down into smaller, more specific targets makes the journey much more manageable. Sit down (ideally with your financial planner) and understand your projected costs for each milestone.

You should be tracking more than your total net worth. Splitting large goals into bite-sized pieces makes managing and tracking the larger goal more reasonable.

6. Stay Informed

You don’t need to know every detail of the global market, but it certainly helps to understand the bigger picture. For example, if oil prices drop, what impact might it have on your portfolio? How do you structure your portfolio if you’re trying to generate tax-free income? Does it matter what state you invest in?

 

Identifying the larger questions amongst the noise of financial information helps you and your financial advisor address potential issues proactively, which is the whole point of portfolio tracking.

Learn the keys to smart retirement and college planning. Download our informative whitepaper today to gain control of your investments. 

Smarter Saving: 6 Critical College Planning Guidelines