You not only need to do research to decide what shares or funds to buy, but should keep a close eye on any news that could affect their value. If performance does start to slip you must be prepared to make changes.
Monitoring your investments
Maintaining a balanced portfolio
Sell strategies
Once you have bought shares, you need to constantly take stock of news that could affect the value of your shares, such as new management or a profits warning, and decide whether the shares are still worth holding. Holdings in other investments you regard as short term, such as covered warrants also need reviewing regularly. Read more about what affects share prices or find out what news you should be monitoring.
The Portfolio Service on this web site helps you to monitor your portfolio and keep track of news stories.
Investing in funds is often regarded as long term but these schemes should still be reviewed once or twice a year. Look at how the fund manager has performed but don’t panic if they haven’t done well. Even the greatest investors have poor periods of performance. The important thing is to understand the reasons why and then, based on their previous track record, work out whether the fund stands a good chance of recovery.
Before you start investing it makes sense to work out what you want from your investments. Do you, for example, want income or growth from your holdings, do you want to invest in specific stocks such as technology or companies with an ethical stance?
Once you have built your initial portfolio it can be easy to lose sight of these aims so you need to regularly look at your portfolio and ask yourself if it still meets those aims. Work out the percentage of your portfolio made up by different stocks and sectors and make sure you have a sensible balance. You could find that a stunning increase in value of just one stock has meant your portfolio will no longer achieve the aims you set for it so you need to consider cutting back that holding and reinvesting the money elsewhere to improve diversification. You can use the Email alerts service on this site to let you know when prices rise or fall.
Remember to ask yourself too if your investment aims have changed. You may, for example, start with the aim of taking big risks in the hope of getting the best returns. But over the years your priority might shift to protecting the money you have made. You might also decide that you need to start taking an income from your investments.
One common mistake investors make is to focus all their efforts on when to buy stocks, not working out when to sell. But as any professional investor will tell you, knowing when to offload your holding is just as important as knowing when to buy.
The most common way for investors to work this out is to set a price target – what you believe is a fair price for the shares. If the shares hit your target you should then look to offload all or part of your holding. See the Email alerts service on this website. If you want to hold onto the shares you should at least reassess your holding to ensure you really believe the shares are worth more.
Failing to sell shares when they reach ‘fair value’ is a common mistake made by investors. Some times they get lucky and the shares continue to rise but you also run a very real risk that other investors will suddenly decide the shares are too expensive and mark them down in value.
If your investments do fall in value, you need to work out if they are still worth holding. It doesn’t necessarily make sense to hold on to your shares in the hope they will recover – it may be better to cut your losses and switch your money into a share or fund that has better prospects. Every time you look at your investments you should do so with a fresh eye and ask yourself whether you would be prepared to buy that company today. If the answer is no, it may be worth moving your money elsewhere.