Profitable investing does not stop with picking sound investments. Getting into a good investment is one thing but managing financial investments is another. Managing financial investments requires a broad view of the intent and purpose of each investment. Managing financial investments also requires continual attention to each and every investment in your portfolio. While getting into a good investment may require a broad survey of penny stock to large cap stocks, managing financial investments requires that you follow the rate of return on investment of your penny stocks and all others. It requires that you stay abreast of the fundamentals and market sentiment that made your stock purchase a good deal in the first place. In today’s stock market, buy and hold can be a fatal strategy. An excellent example is Microsoft which gave its original investors more than a thousand fold return on initial investment. Today the stock pays a nice dividend but no longer promises to grow in multiples of its current value.
The long term goals of most successful investors are to preserve capital and then to beat the rate of inflation. Long term investors look for value in stocks, real estate, offshore investments, interest bearing vehicles, and even tangle assets such as gold bullion. Managing financial investments so as to preserve capital and grow a portfolio can be a constant balancing act. As they say, there is always a bull market somewhere. The trick to managing investments is to pick the best opportunities, to not run around blindly searching for a pot of gold, and to keep track of how investments are doing.
Results versus Process Audits of Return on Investment
Much of what one reads in the stock, real estate, or other investing news has to do with results. So and so invested in XYZ Corp. when the price was low, and made a lot of money when the price went up due to a buyout offer. These are great results but we often do not hear much about the process by which they decided to buy the stock. Successful investors keep track of their profits and also their losses. Managing financial investments requires that an investor learn and constantly revise a process for scouting out investments, assessing investments, and timing the purchase of investments. The same applies to selling investments. Our example of Microsoft comes to mind. It was a spectacular investment for years and years. Now it is a good and secure investment without much room for upward movement. Not only in fundamental analysis of investments important but so is the analysis of how one goes about analyzing. This may sound like going in to a hall of mirrors but it really isn’t. Use results audits to spot problems or successes and use process audits to improve on either end. Whether you are investing in real estate offshore, stocks in a recovering North American market, or still hoarding gold in the expectation of a collapse of the dollar, you need to study fundamentals and keep abreast of market sentiment in managing financial investments.