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Portfolio Tracking

Tools to Help You Stay in Control

By Kara Stefan

Most of the time, the greater the risk you assume with your investments, the greater your reward. But sometimes excess risk can lead to nothing more than just that--excess risk.

That's why it pays to keep track of your portfolio and find out exactly which securities deliver good returns, and which are a drain on your portfolio.

By the same token, it's often hard to compare apples to oranges. For example, whose 401(k) plan performs best, yours or your spouse's? With various percentage holdings in different stock and fund offerings, you can never really be sure.

You could compare your rate of return; but then again there's what's called your risk-adjusted return. It's equally important to know if the amount of risk your portfolio assumes yields proportionately higher returns.

Tracking on the Web
Morningstar.com offers two tools to its members who register as members for free on its Web site:

  • Portfolio Manager allows investors to track, analyze, and continuously update the progress of multiple portfolios. You may use it to follow your 401(k), any investment account, or as a watchlist for investments you are considering.

  • X-Ray Overview allows investors to analyze investments across 8 different screens, including Asset Allocation, Style Box Diversification, Stock Sector, Stock Type, Stock Statistics, Fees & Expenses, World Region, and Top 10 Holdings.

  • Premium Service enhances the Morningstar service (for a $9.95 monthly fee) with the ability to search Morningstar's database of 15,000 stocks and funds, and access their 'Quicktake Reports.'

The Morningstar system helps investors stay on top of how current market conditions affect their portfolios. You can monitor changes in the value of your stocks and funds since your purchase date and study year-to-date returns at both the portfolio and individual stock level.

RiskGrades offers another tool on the Internet for portfolio tracking. It can also be found at other financial Web sites that license the technology, such as Reuters, Sharepeople, and Worth. The RiskGrades tool is free to online users, and its service helps investors put risk into perspective when evaluating their portfolios.

"In general, we've found that people are under invested--in other words, they don't invest aggressively enough," says Ethan Berman, CEO of RiskMetrics, the spin-off company from J.P. Morgan that developed the RiskGrades system.

Once you register at the RiskGrades site, you can input the market symbols and number of shares you own for each holding or mutual fund in your portfolio, and the tool does the rest. It will give each security and your portfolio a numerical risk grade between zero and 1,000--with zero indicating a no-risk portfolio.

In addition, RiskGrades now offers a measure of risk-adjusted returns for assets within a portfolio. This allows you to evaluate returns in relation to the degree of risk being taken.

"Many investors fail to understand that return is only half the equation," Berman explains. "It's not until return is weighed against risk that you achieve an accurate and true assessment of how your investments are performing."

The Software Solution
If you'd prefer more in-depth portfolio tracking that can be combined with your tax and/or accounting functions, try one of the many off-the-shelf portfolio tracking software packages. Some of the most popular offerings include:

  • Easy ROR (Rate of Return)-(Hamilton Software, $149): This package provides exact calculations of internal and time-weighted returns on your investment. It requires only minimal data input, including deposit, withdrawal, and optional tax or fee information.

  • Investor's Accountant-(Hamilton Software, $395): This tool tracks an unlimited number of portfolios through the one-time entry of data for prices and dividends. The software measures portfolio performance, evaluates securities and market trends, can aid you in year-round tax planning, and produces detailed accounting records and financial reports.

  • Reeally!-(Mantic Software Corp., $495): At the top of the line is Reeally!, a performance measurement software that tracks all of your investments and trading activities, measures your true portfolio performance (including long and short positions and margin reserves), compares the performance of filtered slices of your portfolio over time, and handles multiple currencies for international investors.

Coming off a long bull run in the market, investors are now witnessing more market volatility than ever. That's why it's so important to carefully assess what you currently own in order to make informed investment decisions for the future.

Today's technology offers many options for evaluating not only what you own today, but projecting how your portfolio will react in various market scenarios in the future. They say you can't predict what the market is going to do, but you can prepare yourself by imagining what could happen. Accurate and proficient portfolio tracking tools allow you to do just that.

 

 

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