Not tracking your portfolio results is like using a fairground mirror to fool yourself into believing you’re thinner than you really are. It makes it easier to distort reality and pretend that everything is hunky-dory. No indisputable facts, no reason to dispel the fairy story.
I prefer reality to make-believe. But tracking your portfolio on a spreadsheet is laborious and every other method seems to be flawed in one way or another.
So I’ve outsourced the whole job to financial data provider, Morningstar.
Its free Portfolio Manager tool [1] does the heavy lifting – tracking the rise and fall of your assets as faithfully as the tides track the moon.
Below you can see what Morningstar’s portfolio tracker looks like – in this case tracking Monevator’s model passive portfolio.
Quite the looker, ain’t it?
[2]
This Snapshot shows your holdings arrayed on the left, followed by market prices and overall market value. Your current asset allocation [3] is covered off by % weight.
However the more powerful screens lie on the right of the menu bar…
Performance
[4]
This section speaks truth with the directness of a toddler. There’s a lot going on but it’s the annualised return [5] numbers (circled) that I’m really interested in.
These are the numbers that will ultimately determine the fate of my plan [6]. The retirement calculators [7] tell me I need 4% real return per year. I can take the annualised figure given here and subtract inflation, taxes and platform fees to discover my real return.
The good news is that fund fees are already accounted for.
Gain / Loss
[8]
This is the place for truth-seekers who want a warts ‘n’ all picture rendered in pounds and pence.
Every holding you’ve ever owned is archived here with the losses memorialised in red. At the bottom (off screen here) you can see exactly how much you’ve made or lost, in raw £s, since year dot.
Fundamental
[9]
The Fundamental screen helps you to diversify and to check that nothing loony tunes is happening with valuations [10].
The style boxes (circled in red) are Morningstar shorthand for the make up of your holdings.
The equity boxes show the average size of your securities and whether they’re tilted towards firms with value [11] or growth characteristics.
The little selection of security squares we have here shows that Monevator’s Slow & Steady passive portfolio [12] is concentrated in large cap equities. The blend designation means that our fund’s holdings tilt neither towards value nor growth.
Ideally we’d diversify into some funds with a small cap value bias but there aren’t any suitable candidates available for our purposes.
The bond style box reveals the credit quality and interest rate sensitivity of our holdings. You can find a fuller explanation in this Morningstar guide [13].
The P/E Forward column is our canary in the coalmine when it comes to stock market value.
The forward price to earnings (P/E) ratio [14] offered by Morningstar is a guesstimate based on historical projections and analysts’ reports.
It’s a flawed measure but it’s the easiest way for small investors to get some handle on valuations at the fund level:
- Developed world stock market P/E ratios below 15 or so probably indicate that equities are on the cheap side. We can be optimistic about expected returns [15] in these conditions.
- P/E ratios above 20 indicate assets are possibly over-valued and so expected returns have a good chance of being miserable in the future.
P/E ratios have been found to explain only about 40% of future returns, so this is a dicey game to play at best, but you can be more confident about buying when P/E ratios are low.
Time to make tracks
You can track up to five portfolios for free and the portfolio manager can alert you to an equity / bond allocation that needs rebalancing [16], if you tell it to.
Trustnet have a similar tool [17] which I used for a while but eventually abandoned in favour of Morningstar.
New investors with only a few holdings may get by with the portfolio tracker provided by their broker, but I’d recommend using Morningstar as well:
- It’s a good idea to have an independent record of your holdings.
- Morningstar’s tools are more powerful than most brokers’.
- One day you’ll probably want to diversify among brokers. Morningstar’s portfolio tracker will offer an invaluable unified account of your treasure, whereas retrospectively recreating years of trades will be an insurmountable ache in the sacks.
A portfolio tracker is an invaluable record of your progress, and with the Morningstar version all you need do is keep it abreast of your trades.
The hard part is resisting looking at it all the goddamn time.
Take it steady,
The Accumulator