Here's an interesting piece from Money Central that covers the four habits of a successful investor. There's really a lot included, but here's the important stuff:
1. Keep a diary.
2. Keep score. Here are four key steps you have to take.
- Step 1: Pick the right time frame.
- Step 2: Be brutally honest.
- Step 3: Pick the right yardstick.
- Step 4: Start keeping score.
3. Read extensively but selectively.
4. Take stock once a year.
My thoughts:
1. I don't keep an investment diary. That's because my investments are pretty much on auto-pilot since I have a large part of my portfolio in index funds.
For more on these funds and my philosophy for using them, see these posts:
2. I use Quicken to help me keep score, others use Money. I've posted on Quicken versus Money and received comments that many people aren't happy with either of them. That's why I recommend an alternative called You Need a Budget. However, it only works for budgeting, not tracking investments. And for my basic needs, Quicken is fine.
3. I actually use 12.5% annual compounded growth in NET WORTH as my overall benchmark. I've done this for years and am far ahead of this goal as of now.
4. The end of the year is when I review everything. It allows me to get ready for the next year as well as make any year-end buys/sells that are needed.
FMF,
12.5% compounded growth of net worth... how much of that is comprised by your annual savings?
Big Cheese
Posted by: Big Cheese | December 01, 2006 at 12:12 AM
1. 12.5% is my benchmark. I'm actually over that amount in actual performance.
2. I don't know the savings vs. growth/dividend break-out, but suffice to say the savings aspect was much bigger in the early years. This year I'd guess that maybe 25-30% of my net worth gain will be due to saving. The rest will be due to the great performance of the market lately.
I'll post my New Year's resolutions updates in a week or so and will discuss my net worth in a bit more detail there.
Posted by: FMF | December 01, 2006 at 08:07 AM