An ex-colleague recently met up with me and asked me how often he should be monitoring his investment portfolio. Being a busy full-time working individual, it was understandable that he may not have sufficient time to continually check in on news flow and corporate events relating to the companies in his portfolio. Yet, problems will arise if he were to completely neglect his portfolio – a case of “buy and forget.”
In this article, I explore the comfortable “middle ground,” so that if you’re a busy investor, you can know how often you need to check your portfolio as well as zoom in on the important aspects to keep yourself abreast of your companies’ developments.
Quarterly earnings updates
At the very least, an involved investor would need to check on the quarterly earnings results of each of his portfolio companies. This is to ensure the investment thesis remains valid for each of our holdings. But in order not to make this process too laborious or time-consuming for us, we could allocate more of our time to companies which take up a greater proportion by weight of our portfolio.
As an example, if a company merely takes up 2% of our portfolio, then its quarterly financials should require minimal checking. But if another company takes up 20% of our portfolio, then more time and energy should be devoted to that company to ensure all is well.
For each quarterly earnings update, investors should scan through the basic components of the company’s profit and loss statement (Did revenue rise? How has its profit done on a year-on-year basis?), balance sheet (What’s the amount of debt? Has it risen?) and cash flow statement (Was there free cash flow generated?). We should note whether a dividend was declared, and if so, whether it was higher, lower, or similar to the previous year. Finally, we should also read through the management discussion and analysis (often abbreviated as MD&A) section of a company’s earnings update and also browse through the future prospects segment to review what management has done and is planning to do, respectively.
New flow and corporate announcements
Regarding news flow or corporate announcements, we should have our eye on daily news headlines to spot if any major announcements have been made by the companies within our portfolio. A casual scan of headlines from major news publications such as The Business Times or The Straits Times should be enough to alert us if there are any material corporate announcements. We can then proceed to the SGXNet announcements page to look for the specific news release from the company.
The portfolio-weighting rule applies too – check news releases and read through in detail only for companies which take up a significant portion of your portfolio. A good rule of thumb for myself would be 10%, though by force of habit I do check for announcements on a daily basis for all my portfolio companies.
I hope the above has provided you with guidance on how much time you need to check on your holdings, and also which aspects to focus on when scanning through a company’s material.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.