Making Money from Shares – Part 3: Record Keeping

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.

2 comments

  1. When it comes to any investment, loses are part of the experience. No risk no gain. The key is to limit your loses. I lost a lot of money too in 2008 but I have since recovered. In fact it is best to buy when all are fleeing the market because that is when you get a bargain.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

w

Connecting to %s