There 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
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
3. Communicate With Your Advisor
4. Reevaluate Your Goals Annually
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
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.
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