One of the smartest ways to grow your wealth is by investing the money you don’t need to pay your bills or fund emergency funds. In fact, it’s a good idea to open a brokerage account and start buying stocks, mutual funds, and any other investment that matches your financial goals and appetite for risk.
But building a portfolio of investments in a brokerage account is not the only important step to take. Make sure to check your investments throughout the year. In fact, a good bet is to do a quarterly review every three months. Here’s why.
One Email a Day Could Save You Thousands
Expert tips and tricks delivered straight to your inbox that could help save you thousands of dollars. Register now for free access to our Personal Finance Boot Camp.
By submitting your email address, you consent to our sending you money advice as well as products and services which we believe may be of interest to you. You can unsubscribe anytime. Please read our privacy statement and terms and conditions.
It’s all about performance and balance
A great approach to investing is to stock up on stocks and other quality assets and hold them for a long time. This could increase your chances of developing a lot of wealth (whereas if you invest and cash out quickly, you could actually lose money rather than earn it).
If you take this long-term investment approach, you may not feel pressured to check your holdings too often. Suppose your portfolio loses some value from month to month. If you’re investing over a 30-year period, that’s really okay.
At the same time, however, there may be a few investments in your portfolio that are underperforming. And a good way to find out is to do a quarterly review.
It could be that one of the stocks you own will continue to lose value month after month. If this is part of a general stock market downturn, there is probably no need to take action. But if every other stock in your portfolio is gaining in value month after month, you’ll probably want to get rid of the stock that does the opposite. And checking every three months could alert you to a downtrend.
The Ascent’s Picks for Top Online Stock Brokers
Find the best stock broker for you from these top picks. Whether you’re looking for a special sign-up offer, exceptional customer support, $ 0 commissions, intuitive mobile apps, or more, you’ll find a broker who will meet your trading needs.
See the selections
Another reason why it’s important to check your portfolio every three months is that over time the value of different investments can fluctuate. It is a good idea to maintain a diverse mix of investments. If you have too many investments in the same market segment and that specific segment takes a hit, the value of your portfolio could go down.
For example, let’s say you start with a portfolio made up of 30% tech stocks, but over time those stocks gain so much value that they now represent 50% of your portfolio. This situation likely calls for rebalancing by loading stocks from different market segments or other assets. And doing this quarterly recording could help you avoid a scenario where you are suddenly overloaded in a market segment to a risky degree.
Pay attention to your brokerage account
An investment portfolio is not something you just have to define and forget. Instead, make an effort to review your brokerage account every few months.
Having said that, one thing you not want to do is check your investments every day. The stock market can fluctuate wildly from day to day, and you could stress yourself out by checking your portfolio too often. Plus, seeing your balance drop overnight could lead you to make rash decisions, like offloading inventory before they’ve had a chance to recover from a drop. As such, it makes sense to check in quarterly, but not much more often than that.
