Financial Answer Center

Evaluating Performance

Now that you have invested your money and have taken the time to carefully select the investments that fit your goals and risk tolerance, did you think your job was finished? It is your responsibility to manage your portfolio for the long term.

To find out how your investments are performing, there are quite a few places you can go for information. Below are some reference sources:

• For stocks: Value Line Investment Survey
• For mutual funds: Morningstar
• For bonds: Moody's and Standard and Poor's
• The Wall Street Journal
• Investor's Business Daily
• Barron's
• There are many magazines that investors can read, such as Money Magazine, Kiplinger's Personal Finance and Smart Money.

This is a suggested reading list; it is not an endorsement of any of the above publications.

The Pitfalls of Trying to Time the Market

It's human nature to panic when you see your hard-earned money invested in something that drops in value. Your heart sinks and you may kick yourself for thinking you made a poor decision. Prudent investors realize that the market will ebb and flow like the ocean tide.

Follow Performance

Although you shouldn't panic when the market fluctuates, don't make the mistake of investing in something and then ignoring changes in the business climate, the investment itself, or changes in your own life that would make it wise to sell. Smart investors will pay attention to the results of their portfolio. They reevaluate their portfolio from time to time and are willing to make changes.

How often should you review your portfolio? You should review it every quarter. You also may want to review it when financial circumstances change, for instance, if you get a pay raise or bonus. Here is a list of some other circumstances that should prompt review:

• Substantial decline or rise in the stock market
• Change in tax laws
• Significant change in the price of a stock or bond

SUGGESTION: Don't be afraid to move out of a poor performer. When should you switch out of one investment and buy into another? That may sound like a simple question, but the answer is not so easy. There are no definitive guidelines—brokers and professional investors struggle with this on a daily basis. But keep this in mind—a fund that performs poorly in one or two consecutive quarters may be the hottest performer in the following quarters.

Avoid Following the Market Too Closely

Try not to watch all your investments fluctuate on a daily basis. People tend to become obsessive when they see their investments lose value. Don't succumb to your fears too easily. Remember that you are investing for the long-term, so don't move your money around constantly in an effort to stay ahead of the market.

Keep in mind that by dollar-cost averaging, you are benefiting from investing your money each pay period. Because you are buying investments at different price levels, you are compensating for the ebbs and flows of the market.

IMPORTANT NOTE: Dollar cost averaging involves continuous investment in securities regardless of fluctuation in price levels of such securities. An investor should consider their ability to continue purchasing through fluctuating price levels. Such a plan does not assure a profit and does not protect against loss in declining markets.

Keep an Eye on Results

Monitoring the performance of your investments is the key to maintaining a healthy portfolio. And as you know by now, growth is the key to successful retirement investing. Therefore, you need to make sure to take the time to analyze the results and make adjustments.

IMPORTANT NOTE: If the fluctuations in your investments are making you uneasy, you may not be in the right investments for you. That's why knowing your risk tolerance is so important.

Don't Get into More Investments than You Can Monitor

To diversify fully, you may be tempted to own too many investments. Remember that, sometimes, less can be more. Sticking with a few mutual funds may accomplish your goal of diversification and make monitoring easier. Investing in a host of individual stocks can make the most prudent investor crazy. Make your portfolio only as complicated as you can easily handle.