Investment tracking is complex, but understanding the basics can help you feel more comfortable and confident with your trades. Here is an introduction to investment tracking and the best tools for managing your investments now and into the future.
Why Track Investments?
Some investors don’t mind a set-and-forget approach to investing, where they place their money in a fund or portfolio and don’t revisit it for months or years at a time. However, these types of investments are hardly lucrative. If you want to be active in accruing wealth, you need to be more aware of how your investments are behaving.
There are three good reasons to track your investments:
- To know how your investments are performing. Even if you don’t plan to make any changes to your portfolio, you should make it a habit to check in on the performance of your investments. Knowing how much money you have gained (or lost) will give you greater control over your finances and direct future investment strategy. Beginners with small amounts in reliable investments probably only need to check their account statements about once per month, but it might be helpful to compare returns with similar investments in a benchmark index
- To adjust your portfolio if necessary. You should have goals for your investments, and if your current portfolio isn’t on track to meet those goals, you might need to make some changes. Tracking your investments allows you to see which stocks or funds are bringing down performance, so you can swap them for other options that are more likely to yield positive results. The sooner you can identify issues and readjust your portfolio, the less damage can be done to your finances.
- To know what you are paying in fees. All investment portals charge fees — but fee structures vary from place to place. Fees will lower the return of your investments, so you want to stay abreast of how much in fees you will be paying every period. If your fees are starting to accumulate and interfere with the profitability of your investments, you might need to migrate to a low-cost investment platform or take advantage of a robo-advisor.
Tracking Investments in Excel
Excel is every home money manager’s favorite tool because it is so incredibly malleable — and more importantly, it already exists on most computers. However, most beginner investors don’t realize that Excel can do more than produce rudimentary budgets or track expenses; with the right formulas, you can use Excel to organize all manner of data about your investments, from sorting positions like entry price, closing price, and returns to calculating metrics like standard deviation, percentage of return and overall profit and loss.
Unfortunately, there is one major downside to using Excel: You will need to manually input and calculate many of the values used in the spreadsheet’s formulas, which can be incredibly time-consuming and energy-intensive. Though some investors feel they learn from putting elbow grease into their investment tracking, you might not be able to carve out a chunk of your schedule to manage your investment spreadsheet every week.
Better Tools for Investment Tracking
Fortunately, Excel isn’t your only option for tracking your investments. You can find a number of tools that automatically compile information about your portfolio — and some seamlessly integrate your investments’ performance into your broader financial plan. Especially as you gain confidence with your investments, you might not want to waste effort researching data on your investments; instead, you can benefit from robust investment tracking software designed for investor convenience.
You could become a set-and-forget investor — but you probably won’t be particularly happy with your returns. The sooner you take the time to track your investments and understand important metrics, the sooner you can gain greater financial freedom and higher potential for wealth.