When it comes to keeping an eye on the performance of your investments, it’s not uncommon to feel overwhelmed and find it difficult to get a handle on the big picture. Despite the scale of your investments, it’s important to know how close you are to your goals, what you’re paying in fees and how to adjust your portfolio.
In efforts to maximize returns, most investors often reduce portfolio risk through asset class diversification. Since each asset class has different cash flows and varying degrees of risk; diversification reduces risk within each asset class. Couple this with juggling multiple investment accounts, and it becomes clear that keeping track of what’s going on in your portfolio is both necessary and challenging.
Tracking progress is exciting and makes good financial sense since keeping an eye on things is the only way to optimise your investment strategy. With that in the mind of innovative solution providers, apps, online tools and services have surfaced to help investors better understand their portfolios. Consider a combination of these tools and the following tips to track the performance of your investments and maximise your returns.
Track Your Investments on-the-go Using an App
Chances are, you’ll never be static for more than a few hours – and neither will the performance of your investments. Thanks to smart app developers in the ever-evolving fintech sphere, there are investment tracking apps in abundance that let you keep an eye on your portfolios. Here are some of the best.
Use ARQ to connect your investments and immediately see how you are performing with simple, actionable insights generated from mass data collections. Find out whether the fees you’re paying are too high, and precisely what’s considered to be a good annual performance.
The ARQ app allows you to add your current bank accounts, credit card accounts and your investment accounts to be tracked and managed in one place. The app is free to download and track investments, with an option to pay for premium access to intelligent insights on how to better optimise your investment performance.
Robo-adviser platform, SigFig, offers a comprehensive Portfolio Tracker Tool which is free to use – even for those who don’t subscribe to the Robo-adviser itself. The Tracker provides investors with weekly summaries of the performance of their investments and a holistic view of their entire portfolio.
This specific SigFig service is trusted and used by over 750,000 investors to track over $300 billion in investments. By breaking down the week’s top movers and latest portfolio news; The Portfolio Tracker Tool provides a graphic on how well an investor’s portfolio is performing – for tracking on the go, glancing and ease of understanding. It should be noted that the tracker merely displays comparative data on how a portfolio is holding up; and doesn’t actively manage a portfolio.
DIY Tracking Using Spreadsheets
For whatever reason, you can always scrap the apps and the big data they rely on to keep track of your investments yourself using Excel or Google Sheets. Customising your own spreadsheets can incur a lot more work than using pre-existing software; however, the added benefit of being customisable is critical for those investors seeking specific progress information.
Spreadsheets are also useful when it comes to investment calculations and projections. Using formulas to calculate dividend income and forecast performance overtime can enable you to identify your anticipated wealth and plan for the future. Spreadsheets work particularly well for tracking and comparing data. They can also home your investment history in one place.
Using Excel effectively can be a powerful tool for tracking your investments with its excellent capacity for data and data analysis. Consider these handy formulas for investment tracking:
- =DAYS – to calculate the number of days between two dates; displaying your portfolio over time
- =AVERAGE – to calculate the average of a set of numbers
- =MAX and =MIN – to pull the maximum and minimum numbers from a set respectively
Google Sheets are easy to use and simply requires internet access – as opposed to the file and program download requirement of Excel. Google Sheet boasts a “financial” function that hosts a list of useful formulas including the following:
- ACCRINTM, which determines accrued interest security pays at maturity
- INTRATE, which calculates the effective interest rate
Review your Portfolio Regularly
In fact, regular reviews won’t cut it. It’s important to periodically check in on your investment progress. Meaning, you should have a specific time allocated to when you will review and track your investment portfolio.
Regularly checking in to make sure the securities in your account are still meeting your investment objectives is key. It’s also important to assess whether you are still comfortable with the risks, costs and liquidity of your investments at any given moment.
Part of this review should include checks on your files at your brokerage firm regarding your accounts, margin account agreements, discretionary account agreements, option account agreements, as well as ensure all information accurately reflects your personal data.
Use Tracking Software
Installing software onto your system can give you access to additional features that aren’t available through online programs. Many investors who require specific tools will opt for their software – but this tracking technology isn’t exclusive to the pros.
Sophisticated investors as well as the likes of accountants who are comfortable using Generally Accepted Accounting Principles (GAAP) will likely use traditional accounting software to manage their investment holdings like QuickBooks – available in multiple tiers and prices.
The closest thing to professional investment tracking for retail investors is can be found in the software program, Fund Manager. It tracks and displays information on things like interest accrued, coupon dates and yield to maturity. It’s especially powerful for those investing in municipal or corporate bonds.
Use Budgeting Tools
Perhaps less-directly concerned with how your investments are performing but of critical importance when it comes to achieving your investment goals. Online budgeting tools, apps and software should be incorporated into your investment tracking strategy.
First up, Personal Capital is an online tool which can be used to track everything from budgets, credit cards, investments and virtually everything in between. The interface is simple and easy to use and displays attractive and easy to interpret visuals on how you spend your money and how your investments are performing.
The all in one financial dashboard allows you to create, manage and track your budget so you can check in on it to keep track of your expenditures and how they are affecting your overall investment strategy.
Cloud-based PocketSmith makes tracking your budget easy wherever you go. Connect your bank accounts, loans, credit cards and investment accounts to see a complete and comprehensive picture of your finances, including your net worth.
Forecast your finances by projecting your future balances making use of its ‘What-If’ tool. Set up alerts to be notified when your accounts are running low on funds. Schedule payment dates in PocketSmiths calendar to help avoid incurring late payment fees and keep on top of outgoings.
Identify your Performance Drivers
Intelligent investment involves an acute understanding of what contributes to your gains. It’s vital to evaluate what investment decisions led to those identified drivers. Validate precisely what’s driving your portfolio by developing those products. Recreate wealth by following best Practices.
It should be noted, however, that you should not overlook analysing underlying exposures. Keep in mind that the external factors to any asset performance may not remain constant. In fact, in the ever-evolving financial realm (and all other realms affecting it such as the political, social and environmental) nothing remains constant.
Create Portfolio Benchmarks
Upon deciphering your investment direction, you will need benchmarks to guide your progress. Be sure to set up weighted benchmarks that are compatible with your target allocation. Regularly compare your holdings against your relevant benchmarks to track progress. It also pays to monitor your overall accumulated progress against the various benchmarks set in your plan.
Benchmarks are also an effective tracking tool when it comes to evaluating your actively managed funds; since their success is determined by how they outperform their underlying index. However, be cautious not to over-rely on benchmarks – since investing should be about achieving goals, and not a competition. A portfolio should indeed outperform a benchmark, but that does not necessarily mean a comfortable retirement.
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