How to properly review your investments?

TheLittleSaver

Hi everyone

so, I have opened a LISA and invested in a global index fund acc, with the idea of reviewing the investment once a year. So here comes the question:

what would you look at to properly review your investment? Is that something else, apart from just the annual return? Of course, considering this is a long term investment that HOPEFULLY will help grow my pension until I reach retirement age (I'm in my mid-thirties, self employed/sole trader), I understand that I must be prepared for a long ride of ups and downs. That being said though, I am wondering if there is something I can do during my reviews, to understand (or at least have a rough idea) if my investment is going to the right direction?

[Deleted User]

Plot it on Trustnet and add a Index of your choice to it. ie the AFI Aggressive/Balanced/Cautious or FTSE World.

Albermarle

Some platforms also offer a similar facility to Trustnet .

MaxiRobriguez

TheLittleSaver said:

Hi everyone

so, I have opened a LISA and invested in a global index fund acc, with the idea of reviewing the investment once a year. So here comes the question:

what would you look at to properly review your investment? Is that something else, apart from just the annual return? Of course, considering this is a long term investment that HOPEFULLY will help grow my pension until I reach retirement age (I'm in my mid-thirties, self employed/sole trader), I understand that I must be prepared for a long ride of ups and downs. That being said though, I am wondering if there is something I can do during my reviews, to understand (or at least have a rough idea) if my investment is going to the right direction?

There's little to review with a global index fund. It is what it is, the annual gains are what they are. Trustnet will give you an idea but honestly it doesn't matter. You either believe in the long term prospects of a large basket of global equities or you don't. If you do, *it doesn't matter what the gains have been this year*. 

That is very different to having multiple funds or individual stocks, whereby you would need to be reviewing (not just performance, but risks, prospects etc) in order to facilitate good rebalancing.

eskbanker

TheLittleSaver said:

what would you look at to properly review your investment? Is that something else, apart from just the annual return? Of course, considering this is a long term investment that HOPEFULLY will help grow my pension until I reach retirement age (I'm in my mid-thirties, self employed/sole trader), I understand that I must be prepared for a long ride of ups and downs. That being said though, I am wondering if there is something I can do during my reviews, to understand (or at least have a rough idea) if my investment is going to the right direction?

What is the right direction?  The obvious flippant answer is 'up' but the key thing is to ensure that it continues to align with your objectives, whatever they may be, so merely comparing it with index benchmarks won't really achieve anything other than to validate tracking error, so what are your expectations from the investment?

Albermarle

In other words just leave it alone and do not be tempted to fiddle with it .

TheLittleSaver

Albermarle said:

In other words just leave it alone and do not be tempted to fiddle with it .

This sums it up pretty well ahahaha

I guess a question like this would arise once/if I will feel a bit more adventurous with my investments.

Anyway thank you everyone and wish you a wonderful New Year ahead!

AlanP_2

eskbanker said:

TheLittleSaver said:

what would you look at to properly review your investment? Is that something else, apart from just the annual return? Of course, considering this is a long term investment that HOPEFULLY will help grow my pension until I reach retirement age (I'm in my mid-thirties, self employed/sole trader), I understand that I must be prepared for a long ride of ups and downs. That being said though, I am wondering if there is something I can do during my reviews, to understand (or at least have a rough idea) if my investment is going to the right direction?

What is the right direction?  The obvious flippant answer is 'up' but the key thing is to ensure that it continues to align with your objectives, whatever they may be, so merely comparing it with index benchmarks won't really achieve anything other than to validate tracking error, so what are your expectations from the investment?

While in the accumulation phase and with a good few years to go you can make a strong case for 'down' being the right direction. 

Alexland

The most important thing is to review if you are on target for your objectives by growing your understanding, refining your modelling and taking any necessary actions such as increasing contribution rate, gradually derisking, etc.

eskbanker

AlanP_2 said:

eskbanker said:

TheLittleSaver said:

what would you look at to properly review your investment? Is that something else, apart from just the annual return? Of course, considering this is a long term investment that HOPEFULLY will help grow my pension until I reach retirement age (I'm in my mid-thirties, self employed/sole trader), I understand that I must be prepared for a long ride of ups and downs. That being said though, I am wondering if there is something I can do during my reviews, to understand (or at least have a rough idea) if my investment is going to the right direction?

What is the right direction?  The obvious flippant answer is 'up' but the key thing is to ensure that it continues to align with your objectives, whatever they may be, so merely comparing it with index benchmarks won't really achieve anything other than to validate tracking error, so what are your expectations from the investment?

While in the accumulation phase and with a good few years to go you can make a strong case for 'down' being the right direction. 

Indeed, which is why reviewing investments solely on the basis of performance over a year isn't a realistic approach (as OP accepts)!  On the other hand, if, say, volatility over that time was to be outside OP's tolerance then that would be a valid reason to consider alternative investments, so my point was really about reviewing suitability for the investor objectives rather than how the investment compares in a vacuum against its peers....

darkidoe

I do use Trustnet for charting and analysis and also Bogleheads sheets to calculate returns.

I look at Annual return, Dividends, plot a  YTD graph using trustnet. I compare my portfolio numbers to a benchmark (I use an All World index fund) and I try to comment and reflect on why I underperform or overperform. I also try to reflect on current trends. 

I write a blog post pretending I am writing a annual report for a big swanky fund and pretending to be a hotshot. The numbers are just numbers which doesn't mean much but it's more of a reflective practice and to record lessons learnt in the year. At the same time, it is a good way to measure my temperament and by writing about it, it probably makes it easier to understand risk and volatility.  

One thing I struggled with initially but I am understanding it better now after a few years. The difference between 'portfolio return' and 'investor return'. It is important to distinguish between the two and make sure you are comparing like for like. I calculate both for my spreadsheets.