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If you are a goal based investor, as I am, you must monitor your progress to make sure you are on track to reach your
goal.
If you have adopted the 20% growth goal, as I have, you can break it down into a monthly goal. 20% annual growth works
out to 1.67% monthly growth.
(20 / 12 = 1.67)
You will also monitor a general market indicator for your benchmark. As long as your benchmark is on track to reach your
goal, 1.67% a month, there should be dozens of fund choices that are also on track. Since you purchase high momentum funds, your
choices should be doing better than your benchmark.
As long as your investments are on track for 1.67% per month, and the general market is on track for 1.67% per month,
stay the course.
If it ain't broke, don't fix it. You don't need to chase a higher return if you are on track.
Dick Fabian uses an example for monitoring your progress.
Let's say that for some reason you need to make a driving trip across country from LA to New York, City. You don't
want to rush so you figure it's about 3000 miles and if you travel 500 miles a day, you can get there in 6 days. That seems
like a comfortable drive.
You gas up the car and off you go, and drive for 2 days. On the third morning, as you are gassing up for the day's travel,
you see something unexpected. What's that you ask? The cashier at the gas station say's it's the Seattle Space Needle. Seattle,
what am I doing in Seattle. I'm headed for New York!
Now Seattle is a nice place I'm sure. But being in Seattle in two days won't get you to New York in six days.
That's kind of what happens when you suffer large losses in your portfolio. Now you need to make up for lost time and
figure out how to get yourself back on track. Maybe you can drive faster or drive more than 500 miles a day to get back on
track. But going faster might increase your risk of getting a ticket. Driving longer might inrease your risk
of falling asleep at the wheel and causing bigger problems.
You can see how important it is to monitor your progress.
What is my monitoring process?
Over the weekend, I enter the Friday closing prices for the funds I own and the indicators I follow.
Then I look to see if the overall trend, as shown by the Wilshire 5000 and my confirming indicator.
Then I ask, is the trend still up?
Then I look to see if my benchmark, the Wilshire 5000, is on track for my goal of 1.67% per month.
Then I ask, is my benchmark on track to reach my goal?
Then I look to see if the funds I purchased are on track for, and hopefully beating, my goal of 1.67% per month.
Then I ask, are my funds on track to reach my goal?
If the answer to my three questions is yes, I'm done.
If any of the answers are no, I have a bit more work to do.
That is the monitoring process. It can be done in very little time.
Pretty SIMPLE right?
I hope to include a download for an Excel spreadsheet to help you monitor.
Rotate up as needed.
As long as you are on track to reach your goal, no changes are needed. But if one, or more, of your fund choices begin
to fall behind, provided that the general market is still on track to reach your goal, you must sell and rotate up. The rule
that Dick Fabian uses is looking at the last 90 days. If your purchase choices are underperforming, and you have held them
90, they are candidates to be sold and rotated up.
To rotate up, you could just sell your lagging position and place the funds into one of your better performing funds.
You can repeat the process from the "What to Buy" page to find a new fund.
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