Losing track of your investments is easily done, especially if you have several different pension pots and investment accounts to keep track of. To avoid this any investor should make a list of all of their holdings, the providers they are with and the login and account details for each.

But easier still than forgetting about an investment, is forgetting why you made an investment decision.

It’s common to lose sight of why you have chosen to invest in a stock or fund – or even why you chose not to. When there is short-term noise or a share price falls suddenly, it’s all too easy to panic and sell. Similarly, if a share price shoots up it’s easy to get swept away in the euphoria and find yourself piling into an investment you had previously dismissed.

Keeping a record of stocks and funds you have looked at and the reasons you had for investing in them or not can help keep you focused on the long term, and it’s a discipline even the experts stick to.

MAKE A SPREADSHEET

Philip Webster, director of European Equities at BMO Global Asset Management, has been in the investment industry for 15 years but it was only three years ago he started using a spreadsheet to track his investment thinking.

Webster uses the document like a diary to mark which stocks he has or hasn’t bought, when he purchased the shares, added more or sold them, and how they have performed since. He also makes notes about why he made his decision and what was going on in stock markets and global politics at the time to add context, which helps when he comes to look back at his notes.

He says: ‘I write down what it was about a stock that I liked or what I had spotted that I felt the market didn’t understand. It can be difficult, even a few months after buying a stock, to remember what sparked that decision.’

After 12 months he looks at what has or hasn’t worked out and uses that to make better decisions in the future.

Andrew Koch, manager of the L&G European Equity Income (BF18CC3) fund, who also uses a spreadsheet to track his investments, adds: ‘It takes discipline to fully maintain the spreadsheet but it’s a crucial tool in tracking the decisions that have been taken. It also helps to safeguard against biases such as the tendency to mis-remember or adjust the reasons for a decision once further information comes to light afterwards.’

WRITE IT DOWN

Webster says: ‘As an industry we are very good at measuring outcomes and performance but not that great at measuring the steps it took to produce that outcome. I don’t know why people don’t do this more but it has become a fundamental part of my toolbox for investing.’

Recently the fund manager sold shares in Adidas at a profit for €150 a share. But after he sold the share continued to climb, reaching a peak of €220 before easing off again.

He says: ‘It seems like a stupid decision because the share price continue to rise, but I felt the shares looked expensive and I would prefer to sell before they fall sharply. Sometimes you need to be patient before you are proved to have made the right decision.’

DON’T TAKE ON TOO MUCH

Investing is a full-time job, says Stephen Yiu, chief investment officer at Blue Whale Capital, and it’s important not to bite off more than you can chew.

Out of 2,000 stocks across the globe, Yiu and his team invest in just 25 at a time. Any more than this, he insists, and it is impossible to properly keep track of them.

He says: ‘It takes us three or four weeks just to assess one company. I think too often investors have an idea and invest a bit in it and then something else comes along and soon their portfolio has 40 or 50 stocks in it. I don’t think it’s possible to track that many businesses properly.’

CHECK, CHECK AND CHECK AGAIN

Yiu works on a quarterly cycle, starting in the month before a company reports its earnings. He looks at what has changed in the previous three months and how the stock fits into his investment portfolio and thesis. When the firm releases results, it’s time to update forecasts for factors such as revenue growth, profit margins and share prices.

He considers aspects such as what the company’s competitors are doing and what its products or services are, as well as keeping track of any news which could affect the company or its industry. The team then score the stock on a scale of one to five for a number of different areas to determine if they think the shares are cheap or expensive.

Shares in Paypal, one of his top 10 holdings, have suffered recently amid speculation that shoppers will abandon the payments provider in favour of alternatives such as Apple Pay or Google Pay. But using a scoring system and analysing the company so intensely means he is confident enough in the investment to dismiss these concerns – for now, at least.

He says: ‘We don’t think there will be a significant impact on the business but we need to monitor the situation closely to ensure something minor doesn’t start to become a material issue. We are all about being disciplined and having a high conviction.’ (HB)

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