Part 10 - Organize

If you haven’t read Parts 1 - 9 of this series, you may find it helpful to go back and read through them. Please leave any question, comments, or suggestions in the comments at the bottom of each post, or email me with the contact page. Thanks!

Congratulations! If you've followed the plan this far, you're an investor now. Your money is working for you, and over time, you can reap enormous benefits from this. The rest of these posts will be pretty short and are designed to help you keep your investments healthy and hard at work.

Plant a tree because you'll be using them up now

Now that you've an investor, get ready for the deluge of paperwork about to come your way. In general, you're going to see several different types of things:

Marketing materials: the companies with which you do business appreciate your business and want more of it. I toss almost all of these types of mailings.
Account statements: you should get monthly and annual account statements, and perhaps quarterly, depending on the account type. Keep these!
Tax documents: at the end of the year, you'll get statements from your investment accounts that give you the information you need to include on your tax returns. Definitely keep these ones. These may come with, or be a part of, your annual statement.
Prospectuses and annual reports: now that you're an investor, you're going to start getting all kinds of annual reports, prospectuses, etc. for the companies and funds that you're now an owner of. Read them*, then get rid of them.

*Note: I know full well that most of you are NOT going to read the 180-page annual report with the size 4 font that comes every year for each of the 5 funds that you invest in. Most investment writers implore you to read every single one cover to cover, as you're now an owner of the company. It's true, but I doubt most of them go through and read the annual reports for every company held by their mutual or index funds, despite the fact that they own a tiny sliver of each of those companies now. Skim the executive summary and financial statements, check the fees and expenses to ensure they haven't doubled them or anything, and keep on truckin'. If you have a different opinion, I'd love to hear it. What's the best way for a 25-year-old investor to handle this?

Also, you can usually elect to receive a LOT of your paperwork online now. It's definitely more about saving the company money than it is about your convenience, but you may be able to save or print a PDF of your monthly statement instead of getting it in the mail.

What to keep

My original goal here was to break down all the different types of documents you should keep, for how long, etc. But to be honest, it's a huge pain. Here's the truth: unless you get audited, you won't need 98% of what you end up keeping. However, if you do get audited (and if you're wealthy and successful, your chances of an audit increase), you'll wish you had kept EVERYTHING. So here's my recommendation: keep it all (almost). Here's what I do:

Toss any marketing materials, old prospectuses, etc. Basically, if it has no personal information about you or your financial data, but was something a company sent you and 18 billion other people just like you, you likely don't need to keep it.
Have files for your different accounts and keep your monthly, quarterly, and annual statements in there.
Every two or three years, clean out your files and archive everything older than 24 months. I try and keep stuff in roughly the same chronological order that I got it in, put them in huge bundles, wrap a rubber band around it all, and toss it in my archive box.
If it's digital, make sure you have backups somewhere and once those are older than 24 months, label them and toss them in the archive box too.

If the thought of boxes full of basically un-filed and disorganized paperwork makes you recoil in disgust, by all means go through and setup an archival filing system so you can spend 30 seconds to find the March 1957 savings account statement, just in case. In my case, I have found that the time necessary to setup and maintain such a system is not worth it. It may take me 10 minutes to find the same document (in the extremely rare event that I need to), but I'll have saved countless hours by not maintaining such a system over the last 50 years. Just my preference.
Annual Review

Now that you've got everything setup and running smoothly, you're not completely off the hook. This account will likely represent the bulk of your net worth within a few years, so you need to protect it. Every year, you need to set aside at least a day or two This process should only take a few hours. I recommend choosing a day or two that you'll remember easily, such as January 1st and July 4th, or your birthday. You should evaluate your asset allocation to ensure that it still meets your situation and rebalance your portfolio to make sure it still meets your asset allocation plan. I'll devote an entire article to the annual review at a later date.

Task: Setup a filing system.

See my remarks above, but this is really up to you. It doesn't matter how you keep the stuff or in what system of organization (or lack thereof). Just come up with some kind of system and make it happen.

Disclaimer: I am not a professional financial adviser. All information herein is provided in good faith. It is not intended to be, and should not be relied on as, a substitute for independent legal, financial, tax or other professional advice. Readers should seek appropriate legal, taxation, accounting, investment or other expertise in their local and overseas jurisdictions.