Changing environment
The day you start investing is NOT the day you stop looking at your investment plan or doing your homework. You still need to read your financial papers and company reports, keep your eyes and ears open to news affecting your investments and generally be on top of what’s going on with the companies behind your investments. Why?

Because, first, we live in a dynamic world. Nothing is static – which makes your financial plan, no matter how brilliantly conceived and properly implemented, susceptible to changes. A company whose stock you are holding, could for instance, lose its competitive lead and make your investment risky. Changing laws and regulations, turns and twists in the domestic and world economic environments (remember September 11, 2001 bombing of the World Trade Centre in the US?), changes in the capital markets and reversal of company fortunes can affect your investments. As a consequence, your investments may need restructuring because they no longer jive with your financial plan and goals. An investor who wants to succeed, needs to be proactive to these changes.

Modifying your plans
Second, you should also review your portfolios for the reason that your own financial situation may have changed to necessitate restructuring your plan and goals. Say, you may receive a windfall and now have a lot more funds to invest so you can aim for bigger goals. Or you may have increased your net worth by buying a piece of property so that you have less funds for investing and have to adjust your plan.

Evaluating performance
Third, you should continuously monitor and evaluate the performance of your investments to find out how they are doing. If they are faring well, you may want to pump in more money, or take part of your profits and look for another vehicle. If they are not, you may decide to sell. How often the review should be depends on the size and time frame of your investments and whether you have chosen high-risk or low-risk assets.
When measuring the performance of your asset, use the total return figure, and not the income return figure. The income return refers only to the income derived from an investment. In the case of shares, the income is represented by dividend payments; with debt investments such as bonds, the income is in the form of interest payments.

The total return is the more accurate measure of performance because it also takes into account whether there is a gain (or loss) in the value of the investment over time. For shares, total return is the sum of dividend income and the capital gain/loss (difference between the sale price and the cost price). To get the percentage returns, divide the total return by the cost of investment and multiply by 100.

Monitoring shares
You should also monitor the company whose shares you have bought by tracking its profitability, earnings growth, gearing and dividend payouts. Read the company’s announcements, shareholders’ circulars, annual and interim reports and focus on closing dates of rights, warrants, takeovers, earnings, auditor’s report and the directors’ interest. You should also attend the annual general meetings to find out how the company is managed and to gauge its business prospects.

Monitoring unit trusts
For collective investment schemes such as unit trusts, you should monitor your fund manager in terms of performance (relative to the objectives of the fund), strategy, reporting and portfolios. You could benchmark your funds against similar funds.

You can request for information from your fund manager, such as:

  • Performance of relevant investment markets
  • Level of volatility associated with return
  • Rate of inflation
  • Performance of other similar fund managers
  • Strategies employed over recent periods

Fund managers are reviewed on the services they provide, namely performance and reporting.

Have your expectations of returns been met?
Is the fund manager doing what is expected e.g. buying stocks in accordance with laid-out strategies and mandate?

You should also bear in mind that the investment outcome is subject to a large number of random factors and short-term performance data may not accurately assess the fund manager’s investment skills.