This is the eight post in a series I started on August 26th.  The intent is just to explore the basic framework for investing of any kind.  The first post includes a definition.

There are three steps to investing; deciding what to buy, managing the investment (monitor) and finally sell (for profit).  The last six posts focused on step one.

Manage

This is pretty straightforward.  You monitor the investments to make sure they are performing as expected and make decisions (if needed) to hold, improve or get out.

Your approach to this step can be passive, active or all points in between.  This is a very personal choice and is somewhat related to your investment objectives and tolerance for risk.

Simplistically, low tolerance for risk can usually equate to frequent check-ups while high tolerance can lead to a very laid back approach.

Whichever you choose, the key here is understanding what the measures are that will trigger an action.  These can vary widely and again are a personal choice.

Examples of Metrics to Monitor

What things matter most will depend on your investment objectives. If your focus is income investing (dividends, interest) the measures can be the size, frequency and changes in the income stream (e.g., increases, decreases)

Monitoring investments for growth or value would lend themselves more to metrics like changes in the earnings per share, overall valuation of the company, price to earnings and so on.  There are uncountable statistical measures that can be applied.

The overall health of the company and the economy can also be considerations.

Making Change

If your monitoring results are going downhill that does not necessarily mean to get out of the investment.  Depending on the type of investment (property for example) you can actively participate in creating improvements.

For equity investments you can lobby management and or the board or use your shareholders vote at annual and special meetings to try and illicit change.

Critical Step

Be forewarned though this is a critical step.  Investing is not typically something you buy and forget, although there are some investments that are more suited to this approach than others (usually low risk/low return.

Next post I will lead from managing to the final step -selling for a profit.