At the beginning of the year, I like to evaluate my investments to see which ones have been profitable and which ones have tanked. I invest in two areas primarily: stock market index funds and real estate. I invest in the stock market through my tax-advantaged 401k and my Roth IRA accounts. 99% of my investments are in total market index funds like VTSMX and so it is easy to check the investment performance at the end of the year by just looking at the statement published by my brokerage.
In 2022, my stock market portfolio performed terribly (-11% annual) and my real estate portfolio is a mixed bag of winners and losers. There are two main metrics I use to grade a property performance: annual cash flow (rent minus expenses) and appreciation (it is worth more than when I bought it). Based on these numbers, I decide if I want to keep the property or sell it.
For example, one of my properties is now returning only about $5000 in annual cash flow but has appreciated by 100%. I have over $100,000 of equity in this property that is only returning about 5%. I can make almost 5% lending my money for real estate and it would be far less risky. Therefore, the best option might be to sell and cash out my equity to reinvest. Although it has been proven that checking your statement frequently can lead to malinvestments, you should still check and rebalance your investments regularly to ensure you are safeguarding your money and letting it grow.
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