Sunday, 11 December 2011

Record keeping to monitor and manage the performance of your portfolio of shares.

Keeping records of your shares

Many investors put considerable time and effort into the initial planning of their portfolio and choosing the shares they buy.  Yet for some reason, many don't put the same time and effort into monitoring and managing the performance of their portfolio once it has been established.

Regular review of your portfolio is vital to establish whether your investment goals are being met. #    Many investors have a complacent attitude to investing.  As a result, they lack the market information necessary to make informed investment decisions, are forced to behave reactively and may end up losing out.  However by tracking your portfolio, you will give yourself the chance to plan ahead and take advantage of opportunities such as buying more shares in a particular company that, by your reckoning, is trading at a discount.

June - Check portfolio
July - Talk to accountant
August - Rebalance portfolio
September - Take sharemarket education course
October - Update dividend information in portfolio records
November -
December - Talk to advisor.

As the sharemarket is continually changing, it requires regular attention, yet there are no hard and fast rules as to how often a portfolio should be monitored.  The performance of volatile shares may need to be checked several times a day, while more stable large capitalisation companies can be reviewed at longer intervals.

To track your portfolio effectively, you need to know where to locate useful information and be able to understand how it affects the shares you own.

You may be liable to pay tax on any  money you make from shares in the form of income or capital gain in certain countries.  These tax offices of these countries will need details of both income and capital gains (or losses) that you make to calculate the tax you may owe.  However, by maintaining simple, accurate and complete records you will be able to ensure that you pay the appropriate tax without incurring large accounting fees.

If you do want to do the record keeping yourself, the 2 main types of records required to keep track of sharemarket investments are:

1.  Records relating to income for income tax purposes, including, dividend, dividend reinvestment or interest payment advice slips all of which generally are issued by company share registries to the holder's registered address; and

2.  Records relating to purchase and sale prices for capital gains tax purposes, including contract notes, copies of applications made for initial public offerings, dividend reinvestment and bonus shares plan advice slips.

Generally records are required to be kept for 5 years.  However, the events that mark the beginning or the end of the retention period vary according to the relevant provisions of the particular law.

Computer software packages and ledger sheets are available to assist you with your record keeping.  If you prefer to keep paper-based as opposed to computer-based records, an investment ledger will provide you with an easy and convenient way to keep records of your share transactions.
Download example spreadsheets for keeping track of your shares.

 #  For example, you might be aiming to achieve an average after-tax dividend yield of 4% p.a. and capital growth of 8% p.a. over the next 10 years.  In that case, you could buy some shares that provide reliable, tax-effective dividends and the expectation of solid year-on-year growth.

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