Investment tracking tools for busy business owners

The largest and most important investment entrepreneurs can make is the time and money put into their companies. But that shouldn’t be the only investment in their financial lives. Running a business is a risky proposition and the odds of failure are high. If your only source of income and savings is your business and it closes then your entire financial life is ruined and a fresh start could be delayed by years. Most entrepreneurs should complement their risky business with safe investments in stocks, bonds, other financial instruments and real estate. This seldom happens.

A key reason why more entrepreneurs don’t diversify their investments is because they just don’t have the time to manage them. This may be true but it still leaves you and your family fully exposed. Other entrepreneurs that have taken the step towards diversifying their investments hire someone to manage their investments. Just like an employee left unsupervised, performance will suffer without monitoring.

Busy business owners have multiple, low-cost options for making investment decisions and tracking their investments. If you haven’t taken steps to diversify your investments then start by considering what you need to track.

Investment tracking tools

A proper investment-tracking program should track performance accurately. Amazingly very few tracking solutions do this. If an investor purchases a share of stock for $100 and sells it for $150 many tracking programs and websites will display a 50 percent return. This doesn’t take into account factors like timing, dividends, fees, taxes and more. It isn’t an accurate return.

When selecting a tracking program make sure it can:

Track different types of investments.

Closed-end mutual funds, Open-end mutual funds, Exchange-traded funds, individual stocks, money markets funds, bond funds and cash are just some of the typical investments that a well-diversified portfolio can contain. If your software can only handle individual shares of stock then it won’t offer a true picture of your investments.

Track investments held at different institutions.

Many bank s and investment houses offer free software that can track your investments held in the account. But if you want to simultaneously track investments held elsewhere they aren’t as helpful. A good solution should be “institution-neutral” offering the ability to link all of your investments no matter where they are held.

Calculate the effects of fees. Many investors underestimate the impact of investment management fees. They are usually calculated as a percentage of assets under management, not profits. A fee of 2 percent on assets many not sound high but over time the effect is significant. Take a $500,000 portfolio that sees a return of 10 percent over a year yielding a $50,000 profit. The management fee based on assets would be $10,000 or a whopping 20 percent of your return. If you don’t track this closely fees – over decades – could consume the majority of your investment returns.

Take into account dividends.

Dividends paid out on stocks can usually be treated in one of two ways: paid in cash or reinvested. However they are handled, failing to track them won’t provide accurate returns.

Provide alerts.

While long-term investors shouldn’t be focused on daily market fluctuations having an alert system is important. The parameters of the alerts should coincide with your overall investment goals.  For example if one goal is to keep 25 percent of your investable assets in bonds, then an alert should be set if this fluctuates by more than 5% (above 30 or below 20).

There are several popular web-based services that include investment tracking programs that business owners can consider.  These include: Personal Capital and SigFig.

Once you have the ability to track your investments, it’s important to setup a reasonable schedule to monitor them. What’s reasonable depends on the nature of your investments. For most long-term investors a quarterly review is sufficient. Some feel more comfortable with a monthly review.

Scheduling a time on your calendar to allow for that review is critical and it should be given the same important as a client meeting. Checking more frequently (like daily or hourly) will only add to your stress without providing useful information. Investments are best understood in the context of time and experience. You can’t rush that.

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