How to Audit Your Own Investments

The primary purpose of making an audit is to check the financial information and ensure it reflects your financial position at a given date. Audit financial statements are a vital tool for you to plan various types of investments and allow you to understand the detained operational due diligence. It is an investigation and verification process of your personal or business records and procedures. So, how to audit your own investments? Let’s find out!

List you invest-able assets

The invest-able assets, in general, include things like bank accounts, work retirement plans, emergency funds, annuities, stocks, bonds, insurance policies’ cash value, CDs, and mutual funds. Make sure you include at least your emergency fund, your work plan account, and other savings accounts.

You may also include individual stocks, but this is optional. The step does not take long if you keep a short “list of investments.” If you have rolled over some 401(k) accounts, then you may not have most of the assets on your list, and you may crash on your life insurance policy.

Find the account values

It is important to find the account value for all your invest-able assets and total them up. After you have a list of the accounts, make sure you find out the amount of money in each one.

It is relatively a simple step as you can dig through a few folders in your cabinet to find IRA statements before you decide to register an account for online statements. It becomes easy to add everything up.

Check your investment portfolio

Once you have the entire list of accounts, it is time to dissect each account. For example, you can figure out whether or not you have made investments in mutual funds. If yes, what kind of mutual funds and whether they are individual stocks or not. Let us explain this with an example.

For example, your husband’s Roth IRA consists of 41% value funds and 59% global funds. Your Roth IRA with another firm is 41% growth and 59% growth and income. So, it is important to include the funds, which are invested too.

The performance of your investments

You can figure out the performance of your funds by reviewing your financial statements. Except for your work plan, all your accounts are upfront about the performance of the funds. You can find out how well it did from the start. For example, for the last 5 or 10 years.

When you evaluate investment performance, it is important to focus on two basic measures, such as the absolute return and the relative return. The first one is the net of your contributions and withdrawals, which are generated in your portfolio over a specific time frame.

It determines your ability to reach your long-term financial goals. However, absolute return does not tell you about the effectiveness of your portfolio and that’s why you focus on relative return.

You can measure it by comparing your portfolio’s absolute return to the appropriate benchmark. Lastly, the purpose of an audit is to provide an objective independent evaluation of the financial statement that increases the credibility and value of your investments.

Thomas Moore is a proud American with a Bachelors Degree in Business Administration from the University of San Diego. He has been in the financial industry for many years holding numerous licenses in multiple states. He currently helps operate Cash King Loan Company and is our resident expert on all things finance and a great writer. LinkedIn Profile