How to make Asset Allocation Easy

[RYD]

In keeping with the trend of trying to increase posts I am asking for help in asset allocation. Does anyone have or know where I can find software or a spread sheet to make the task of re-balancing easy.

I must admit I put off this activity because it is just a pain to do but I also know it is important

Thanks for the help

 

[Mr._johngalt]

Here's how I do it. Reach into a wastebasket and find
an old discarded piece of paper. Wipe off the coffee
grounds and cigarette ashes. Now find a functional pen or pencil. Write down your investments/assets by
category. Total your net worth and divide each category
by the total. If the result looks reasonable, don't change anything. You can't get any easier than that.

 

[RedOscar]

RYD,

When most people speak of rebalancing, they have a portfolio which has strayed from their desired asset allocation, and need to bring it back in line; usually on an annual basis. In these situations, a person would simply sell some assets from an asset class which have increased in value to purchase more assets in an asset class which have decreased in value. Classic sell high - buy low strategy.

In reading your post, I still have the following questions. Are you looking for help in establishing an asset allocaation? Or have you already decided on a target asset allocation for your portfolio and now wish to move your porfolio to this allocation?

If you are trying to establish an asset allocation, then you are going to find as many opinions and methods as there are people. You probably don't need software to solve this problem. There is a software product for professionals called "Allocation Master" which attempts to build an assets allocation along the efficient frontier. I think it costs something like $500 and is intended for financial planners and the like.

If you are trying to move an existing portfolio from a position of no asset allocation strategy, to a new desired long term strategy, then the question is more along the lines of "How quickly should I make a drastic change in strategy?" If the changes are significant, then I would suggest moving assets slowly over a period of 12-18 months using some form of dollar cost averaging, if this is practical.

Have I in any way more closely identified the intent of your question in my comments? Let us know.

Red

 

[RYD]

Red Oscar,


Thanks for the reply. I am looking for a spread sheet or software that would allow me to just plug in % or catagories then calc them to see the corect amounts per % or asset catagory. The goal is to simplify the proceess and automate it. $500.00 seems a bit high for this ability and I would guess the software you noted has a lot more features.

Sadly I find that I put off this necessary work due to the time it takes and tht I cannot try various allocation models without a lot of work.

Thanks for the help sorry my question was not more clear

RYD

 

[Ted]

Here's how I keep tabs on my asset allocation.

I set up a computer spreadsheet with the following columns:

1. Asset name 2.Number of Units (shares) 3. Price per unit 4. Total value (col. 2 times col. 3)

I then take the total value in column 4 and "allocate" it to one or more asset categories in columns 5 through 11, as follows:

5. Cash equivalents 6. Bonds and equivalents (such as cash value life insurance) 7. High yield bonds 8. Large cap U.S. stocks (S&P 500) 9. Small/Mid cap U.S. stocks 10. Foreign stocks 11. REITs

The program totalizes the values in columns 4 through 11 at the bottom. Then, I have it divide the total for each category of assets by the total of column 4 to give the percent allocation to each.

A person might want to further categorize their assets as to growth stocks, value stocks, muni bonds, TIPs, precious metals, etc. I think that the rather unique feature of my approach, however, is to recognize high yield bonds and REITs as distinct asset categories.

 

[bongo2]

I just discovered that Vanguard has a tool that helps track asset breakdown. On their website Vanguard will give me my asset breakdown (stock v bonds etc) for all my Vanguard accounts. Even better, if I tell it my other online accounts (give Vanguard the account # and password if you trust them enough), and it will look at all my other assets and give me a total allocation breakdown. Very slick.

 

[ronbyrd]

RYD,

I put together an Excel spreadsheet that tracks my investments by Asset Class. It has 4 major column groups (1) asset name and some details (like shares owned, (2) Current Value, (3) Target Value, (4) Difference. Each of (2), (3) and (4) has 4 columns that give value by (a) % of Asset Class, (b) % of Stock Class or Fixed Class, (c) % of total portfolio, (d) in $.
I wrote a macro so I can import securities and today's prices into this from Quicken (if your portfolio has few entries and is fairly stable it would be easy to just update prices manually).
I also calculate an inflation adj. withdrawal rate and display what this is on a monthly basis (I get the CPI from Bureau of Labor Statistics).
I'd be more then happy to send the Excel template. Let me know your email address.

 

[ronbyrd]

GDER,

The one problem with Quicken on Asset Allocation tracking is you have to use their Asset Classes.
As to not bothering with Asset Allocating, I use to think the idea was restrictive as I was a stock and mutual funder picker that did resonable well. But after lots of reading this last 6 months I've become a beliver. Its the most broadly accepted way of metigating downside risk and the reading has convinced me of the futility of trying to beat other guys at the market who work full time at it and get paid big bucks. (I admit I still look for good stock picks but they now make up a small percentage of my portfolio.)