Best tool that charts a portfolio’s combined performance

[krldrummerboy]

Well, I 've started the switch from Ameriprise to Vanguard. Both sides have been pretty accommodating and Vanguard is being very helpful with their time and resources. For instance, they will convert my Ameriprise Coverdell ESAs to 529 accounts and explained the differences rather than pushing me one way or the other. They don't offer Coverdell accounts, though. I am fine with the 529 for my kids educational savings. Now, I need to liquidate the annuities and transfer the proceeds. Actually, to quote early-retirement posters I should say liquidate my EVIL annuities!

Back to my question: I have been doing my due diligence in regard to how I want to invest going forward. I have decided to do it on my own! One of the things that slows me down is when I want to compare a group of mutual funds or a mock portfolio of investments to try and see the repercussions of different scenarios. I have been using a method I saw on Bogleheads website that uses Morningstar.com: (https://www.bogleheads.org/wiki/How_to_use_Morningstar_growth_charts)

But, I dont think this allows me to save my setups and charts. Starting over everytime is a bit of a pain. I don't really want to pay for something. I dont plan on ever day trading or anything like that.

Thoughts on which tools are good to use?

Also, thoughts on how to go about this accurately? What I mean is what should I compare an invesetment portfolio to? Perhaps compare it to a targeted retirement fund as opposed to the S&P. Dividends and stuff like that may skew the data as well.....

Thanks,
Kevin

 

[ERD50]

Fuggetaboudit. Pick an AA, and fill it with some broad index funds. Go play.

None of those tools can predict the future.

-ERD50

 

[travelover]

Fuggetaboudit. Pick an AA, and fill it with some broad index funds. Go play.



None of those tools can predict the future.



-ERD50

My thoughts exactly.

 

[DrRoy]

Fuggetaboudit. Pick an AA, and fill it with some broad index funds. Go play.

None of those tools can predict the future.

+1 Trying to choose what will outperform going forward is a fool's errand. I tried lots of ways to do it for decades and finally learned that you can't. Determine your risk tolerance and try to keep your investments passive. I recommend reading Your Money and Your Brain by Jason Zweig.

 

[petershk]

I think rather than focusing on predicting the return of the assets (i.e. trying to figure out if VTI will outperform VXUS or whatever) I think it's better to start with what you can control and also evaluate your own disposition.

What you can control:
1) fees (make them as small as possible).
What I do is take my total investable assets, divide by 25 (4% rule) and that is my annual income. Then I figure out what % of my income I am willing to pay for fees, services, etc. For example, if you have 1M$... that earns 25k/year. If you are paying a 1% fee on your investment that will be 10k which is roughly half of your income. You need A LOT of market outperformance for a 1% fund to beat a 0.09% fund.

2) Taxes. Depending on where the money is (taxable vs. non-taxable account), how much of it and what your tax situation is like can play a role on asset allocation. In my case most of my money is in a taxable account so there's not that much I can do/worry about, but I DO try to keep distributions (dividends + other events) predictable and reasonably low. The reason is that spikes in income can cause problems with Obamacare, capital gain tax treatment, etc.

3) Disposition.
This one is hard because we delude ourselves. But basically I try to set things up so that I don't have to make many decisions. The reason is that I am an incurable tinkerer, and tinkering with investments has (in my case) not given good results. My best results are when I DO NOTHING. So I've been moving to a fairly simple asset allocation and withdrawal system that minimizes making decisions. Then I have a small bucket of play money that I use to keep my hands busy but out of the honey pot.

Anyway... hope that helps some. I'd focus on almost everything EXCEPT which fund will outperform which other fund and see where you end up

Lots of luck!

 

[LOL!]

www.portfoliovisualizer.com might do what you want.

I think it is rather easy to outperform a given portfolio over time. It is not so much about fund selection as it is about risk selection. For instance, to outperform a 60/40 equities/bonds portfolio one could [will need] to use a 70/30 portfolio for some of the time used for the comparison.

 

[samclem]

Fuggetaboudit. Pick an AA, and fill it with some broad index funds. Go play.

None of those tools can predict the future.

-ERD50

+1. You won't be able to fine-tune things for the future based on the past, because past returns provide a very imprecise clue as to how things will go in the future. I know--I've been down the road you are on, and probably for much the same reason. But if you settle on a reasonable AA, choose low-expense ways to invest in it, and then mechanically invest/rebalance to it, you'll be doing as well as can be expected: Better than probably 90% of investors and better than virtually all of your old Ameriprise "classmates." And, really, just as well as if you keep massaging the old data for years to divine a more optimum arrangement. That's good enough, isn't it?
There's no sense in trying to measure a blob of jelly with a micrometer, that's what we do when we try to fine-tune our future based on past market performance. We're implying a precision that is unobtainable based on the situation. But, like I said, I've done much the same.
As far as tools: You may have to buy something if you really want to do this. Maybe a mean-variance optimizer (MVO) program, and the historical data to feed it. Here's a link to an old William Bernstein article that talks about MVOs--Google around on his site for more. These will spit out "Efficient Frontier" diagrams. This ay be an interesting intellectual exercise based on your interests, but I caution against believing too strongly in the predictive value of what comes out--it's only as good as the future's resemblance to the past. In the real world, getting "close" is going to have to be good enough. And you can get "close" with about an hour of research into model portfolios and choosing MFs/ETFs that meet your desired AA at low cost.

 

[krldrummerboy]

Thanks LOL!

These tools look good for what I want.

I guess I should have clarified my intention. I don't expect to predict the future or constantly tweak things. It will be more a learning tool where I can play around with different mutual funds and asset allocations.

 

[travelover]

Thanks LOL!

These tools look good for what I want.

I guess I should have clarified my intention. I don't expect to predict the future or constantly tweak things. It will be more a learning tool where I can play around with different mutual funds and asset allocations.

I wasted a lot of time and money playing around and wish I'd known about lazy portfolios and asset allocation when I started out. It doesn't need to be complicated.

 

[samclem]

I wasted a lot of time and money playing around and wish I'd know about lazy portfolios and asset allocation when I started out. I doesn't need to be complicated.

One can learn a lot by plying around with the tools, but it's not an especially efficient way of learning, and one risks learning "facts" that just ain't true. I've read some well-written books and articles along the way by folks who are really good with stats and finances, and they made things clear in a more foolproof way than my bumbling around did (i.e. less prone to seeing patterns and dependencies that were not truly supported by the strength of the data, etc). But, I gotta say that doing it the hard way did make it stick.

 

[petershk]

One can learn a lot by plying around with the tools, but it's not an especially efficient way of learning, and one risks learning "facts" that just ain't true. I've read some well-written books and articles along the way by folks who are really good with stats and finances, and they made things clear in a more foolproof way than my bumbling around did (i.e. less prone to seeing patterns and dependencies that were not truly supported by the strength of the data, etc). But, I gotta say that doing it the hard way did make it stick.

Yup.
I'm an incurable investment tinkerer so I need to have play money to mess with.

Probably the best articles I read are the ones discussing Fidelity's finding that their best investors are people who forgot about their accounts (inactive).
http://m.aol.com/article/2014/09/10/investing-success-secret-amnesia/20959031/?gen=1

My own experience bears this out as I had a lingering 401k that went untouched for 4 years.

So yeah... the tools are great, but my advice is if you are a tinkerer like me... put some play money aside. For 90%+ pick a SIMPLE asset allocation and put down the investment knives because you'll probably hurt yourself. Even with just indexed EFFs you can do endless theory crafting and drive huge activity .

Then again... most of us hurt ourselves then put down the knives... .

Sent from my HTC One_M8 using Early Retirement Forum mobile app

 

[big-papa]

A close cousin of portfolio visualizer is portfoliocharts.com. Worth a look. As others have said don't worry about nth order fine tuning. But you can get a feel for longer term trends and why we diversify in the first place.




Sent from my iPhone using Early Retirement Forum

 

[LOL!]

Probably the best articles I read are the ones discussing Fidelity's finding that their best investors are people who forgot about their accounts (inactive).
The Secret to Investing Success: A Good Case of Amnesia - AOL

The Fidelity story cannot be corroborated. Yes, the thought was mentioned, but so far it is hearsay. You know, the ol' "friend of a friend of a friend ... said ..." kind of thing.

 

[Markola]

One free tool somewhat related to the OP's question that I've benefited from lately is the Personal Capital app and website. It gives a complete, real-time picture of all of your accounts. Once I plugged in my account numbers it gave my actual AA, which was 89/11. That was surprising and too rich for me so I've since dialed it back to approx 75/25. It also analyzes the efficient frontier and it does calculate basic past performance of your portfolio. Naturally, it tries to predict how your portfolio will do against their prescribed efficient AA for you, which is of course not possible. The tool is free (for now?) though I had a few polite telemarketing calls at first from Personal Capital asking to manage my money. I said no thanks and they've since left me alone. I read that the company sees the free tools as a valuable loss leader, which provides them a highly qualified prospect list for their money management services. Unfortunately for them, I'm a confirmed DIYer. It's definitely been worth the minor annoyance of a couple of polite phone pitches in order to have a tool that provides such a comprehensive look at all of my assets for the first time. Even my home equity estimate via Zillow is in there too.

 

[samclem]

The Fidelity story cannot be corroborated. Yes, the thought was mentioned, but so far it is hearsay. You know, the ol' "friend of a friend of a friend ... said ..." kind of thing.

Maybe so, but there's plenty of evidence that investors, in general, get worse results than the vehicles in which they are investing. They (in general) buy and sell in such a fashion as to, remarkably, do far worse than the average of the investments they are using. I would find it very easy to believe that, on a risk adjusted basis, the portfolios that see the least buying/selling produce the highest returns.

DALBAR has compiled a long history of the results obtained by investors. Regardless of the time period, the picture looks pretty much the same:

 

[LOL!]

DALBAR has compiled a long history of the results obtained by investors. Regardless of the time period, the picture looks pretty much the same:

Lots of folks have criticized the DALBAR studies as flawed and designed to come up with a result that favors using advisors over do-it-yourself individual investors. A little Google Fu finds
https://www.kitces.com/blog/does-the-dalbar-study-grossly-overstate-the-behavior-gap-guest-post/
and
http://www.advisorperspectives.com/...e-explanation-for-dalbar-s-misleading-results


I'm not saying that the least buying/selling investors do not do better, but there must be some better studies. I'll add some hearsay of my own: I think Vanguard showed that Vanguard investors actually did slightly better than its index funds.

 

[samclem]

I'm not saying that the least buying/selling investors do not do better, but there must be some better studies.

This one is largely a recap of many previous academic studies on the subject, and it also contains some summaries of studies on why people continue to exhibit behavior that is against their best interests. Much of it is fairly intuitive (the average person thinks he's smarter/better informed, etc than average, etc). From the study:

To preview our conclusions, the aggregate (or average) performance of individual
investors is poor. A big part of the performance penalty borne by individual investors
can be traced to transaction costs (e.g. commissions and bid–ask spread). However,
transaction costs are not the whole story. Individual investors also seem to lose money
on their trades before costs.

 

[LOL!]

Thanks for the link to Odean and Barber. The next sentence after the one you quoted is:

The one caveat to this general finding is the intriguing evidence that stocks heavily bought by individuals over short horizons in the US (e.g. a day or week) go on to earn strong returns in the subsequent week, while stocks heavily sold earn poor returns.

Take-home lessons might be:
1. Don't pay commissions and fees. Easy to do with no-load mutual funds and no-commission ETFs.

2. Don't pay bid/ask spreads. Easy to do with no-load mutual funds. If one must use ETFs, then consider ETFs where the bid/ask is 1 cent out of a $100 and make the other guy pay it.

3. Don't create unnecessary taxes.

4. Don't trade individual stocks.

I can think of other lessons as well.

 

[samclem]

The one caveat to this general finding is the intriguing evidence that stocks heavily bought by individuals over short horizons in the US (e.g. a day or week) go on to earn strong returns in the subsequent week, while stocks heavily sold earn poor returns.

Yeah, but it seemed like fairly restricted sample size. Worth following up on, though.

But, more broadly, if we believe that individual investors consistently underperform the assets in which they invest (on a risk-adjusted basis), how can we make money by arbitraging that? How can we "short" individual investors, and would we come out ahead after trading costs?