4 Reasons to Keep an Investment Journal
An investment journal stages your progress and goals, and establishes your research and forward momentum.
Whether you’ve already built an investment portfolio or are just getting started, it’s important to understand your investment goals and track your progress along the way. Keeping an investment journal is a simple and effective way to monitor your journey.
An investment journal is more than a log tracking your net worth. It can give you insight into who you are as an investor and what you hope to accomplish with your portfolio. Here are four reasons to keep an investment journal and how you can make it work for you:
1. Track Progress Over Time
At its core, an investment journal is a place for you to track your investments and how they perform. You can do this on a computer or in a notebook. Just make sure you keep your journal in a safe place that you can access easily. Log specific information in your journal, such as:
- The date you invested
- How much you invested
- What you invested in — rental property, stock shares, etc.
- What you expect to get out of the investment
- Risks that might be involved
Regularly update gains or losses, as well as any information that may explain changes. You should also track expenses related to your residential real estate investments so you can deduct them when filing taxes. Tracking this data over time will help you monitor your wealth and make future decisions.
2. Set Financial Goals
Making money and building wealth are the overall goals of investing, but it’s important to set specific short- and long-term goals. Your short-term goals might be to earn extra money for your savings account, while your long-term goals might be to live off the dividends of your investments. You can use these goals as benchmarks to track your overall progress and make adjustments accordingly.
Set your goals for a specific time period, such as quarterly, biannually, or annually. At the end of each period, look at your investments to see how they’re performing. If an investment exceeds your expectations, you may want to increase how much you’ve invested to grow your wealth more quickly. If your investment is underperforming, it might be time to sell and invest the profits elsewhere.
If you’ve invested in real estate, you can take advantage of a 1031 Exchange, which allows you to defer paying capital gains tax by reinvesting the profit into the purchase of a like-kind property. Research the best 1031 Exchange companies, including by state as applicable, to help you maximize the earnings on your investment.
3. Log Lessons Learned
Your investment journal is a place where you can keep research you gather over time as you make investments. For example, real estate investors who buy and flip homes have more than one option for selling property. They can hire a real estate agent, sell to a company that buys houses for cash, or sell the property themselves to avoid paying a three-percent real estate commission.
Research what each choice entails and make notes of what you learn. You’ll have a convenient reference guide when it’s time to decide what to do.
4. Understand Decision-making and Investment Style
There’s no one way to build wealth over time. How you invest and what you do with your investments are personal to you. By tracking why you made a particular investment, you can gain insight into your decision-making and investment style, which in turn can help you make future decisions with more confidence.
If you’re buying and flipping a house, experiment to find which approach works best for your skill set and your overall goals. If you’re selling for-sale-by-owner, you can keep all the profit, but you’ll need specific skills and experiences to succeed. With an agent, you’ll have an expert on your side, but you’ll have to pay a percentage of your earnings for commission. By selling to a company for cash, you’ll have a faster turnaround, but you’ll typically sell below market value.
When you look back at your investment journal, you can see what makes the most sense for you financially looking forward. You can remove the guesswork, and make future decisions with a keen understanding of why it’s the best option for you.
Luke Babich is the Co-Founder of Clever Real Estate, a real estate education platform committed to helping home buyers, sellers, and investors make smarter financial decisions. Luke is a licensed real estate agent in the State of Missouri and his research and insights have been featured on BiggerPockets, Inman, the L.A. Times, and more.