Keeping records is essential if you want to succeed in investing in the stock market. There are two main reasons for keeping records: for tax (capital gains tax and withholding tax on dividend) and for feedback (to work out your performance and to learn in order to improve performance). Luckily in Nigeria the tax is collected upfront so you need not worry about that. However, you do need to keep records for the purpose of feedback. Without records, you cannot gauge your performance nor work at improving.
Although there are software packages for keeping records like Quicken, a spreadsheet like Excel is adequate.
What sort of records should you keep? I keep two records. The first is my analysis of why I bought or sold a share. The analysis includes my rating of the company based on my checklist, its fair value, exit price and the thinking behind my decision. I update this every time I buy or sell.
The second is an excel sheet showing basic information about my entire portfolio. The basic data include:
• Name of Company
• Number of shares Purchased
• Average Purchase Price including all charges
• Total Cost
• Earnings Per Share
• Earnings Yield
• Dividend Per Share
• Dividend Yield
• Year End
• Latest Ex Dividend Date
• Fair Price Based on My Valuation
• Exit Price
The meaning of some of the above terms will become clearer as we progress through the series.
The above records help me track my performance and also provide insight into my decisions. For example, was my analysis right and was the purchase profitable or did it turn out to be a loser? Did I sell too early thereby exiting a company that continues to do exceptionally well or did I stick to a loser despite early warning signs?
I therefore encourage you to keep good records although it may appear tedious in the beginning it will eventually contribute positively to your success in investing.