How to do an investment review?

[zetta]

My resolution for 2008 is to review my investments quarterly, using the tax deadlines as a reminder. But now that April 15 is here, I'm not sure exactly what I should look at! What would you look at when doing a quarterly investment review?

[maat55]

Hopefully, a larger number than last quarter.

[LuxLiving]

One thing I'd be looking at is how far I was off of my targeted asset allocation percentages.

Have you decided how often you will rebalance? Or if not how often then what will trigger a rebalance?

[jIM_Ohio]

I would start by saying you need a baseline. A spreadsheet might help you track this.

Across the top label the account types. For me- Roth, Rollover, 401k, savings account (CDs) and a taxable account as well.

You want 3 groups of columns. First group is account balances. So list account balances for all of above (401k, IRA...). Second group is deposits. List deposits for all accounts. Third group is rate of return calculation.

Then going down the spreadsheet put your dates in on the left side. Then plug numbers in for each quarter (deposits and balances) and then have spreadsheet spit out a rate of return. Check return a few ways-
1) overall portfolio return
2) account return (return of 401k investments vs return of IRA investments)- this is important for asset allocation and similar.

Then have another IRA spreadsheet. List all funds in IRA and the theoretical percentage of each (asset allocation). If you keep different asset classes in each account (such as large cap in IRA and small cap in 401k) then this is harder.

Each of my accounts has the same 45-15-15-15-10 allocation. So when I analyze my IRA, I don't need to worry about 401k allocation at all- greatly simplifies the "next steps".

Actions to take:
I would NOT buy/sell (rebalance) each quarter. What I might do is
a) in April, July and November change the contribution percentages in an effort to rebalance. Buy LOW.
b) in Janurary SELL what is high to rebalance and modify the contributions to align to allocation.

I rebalance twice. June is about contributions and January is as I describe to you. One thing I am considering is rebalanceing less than annually (because most bull runs are more than 12 months long), so I might only sell every 18 months.

Depending on age, maybe sell 1% of allocation a) (stocks) and buy 1% of allocation b) (bonds) to slowly move monies to more stable investments. I would only do this if you are aggressive now, and want to move to a more moderate allocation later. In 5 years, you would be moving from x% bonds to x+20% bonds.

[zetta]

I was thinking I would rebalance every 12-18 months. Reviewing it quarterly is to help me be more aware in the meantime.

Would you look at the performance of individual funds at each review? If so, what specifically would you examine?

[sweeps]

zetta, one place to look might be Morningstar X-Ray. It would alert you to being overweighted in a particular style or sector.

[jIM_Ohio]

The same way I look at each account as a whole, you could break down each account the same way.

Use what I posted previously as a summary page. Then for each account:

list fund names across top. Have 3 sections- balance, deposits and return calculation.

Then each quarter add a row and input the quarterly numbers. Quarterly balance, quartery deposit and have this calculate quarterly return.

I would be careful about doing this- you will see the volatility early on (some investments will go up or down ~8% per quarter, even if yearly average return is 6 or 7%.

You might make decision after two quarters a fund licks rocks, when in reality the reason for it's high return year in and year out is because it is volatile.

I use the yearly returns of the mutual funds to decide if the fund is licking rocks or not. An analysis like this is better suited to see if the funds quarterly return and your quarterly return match (they might not).

If you are depositing into volatile funds (which move up and down 3% per day or 8-16% per quarter), it's possible the timing of your deposits is hurting your returns-
this is the data I would be looking for.

I would NOT drop a fund because my return calculations for the fund are bad. I would drop a fund if it is NOT returning as high as I expect that asset class to perform. Measured in 5 year and 10 year returns (quarterly returns do not matter if 10 year trend is upward).

[zetta]

I've got 8 accounts to deal with (IRA x2, ROTH x2, SEP-IRA, 401k, taxable x2) and am invested in 15 different mutual funds (with much duplication across accounts). The investments total about $750k, so I don't think the number of fund is necessarily unreasonable.

I'm not really keen on manually doing all the input to an excel spreadsheet. Can anyone recommend good software to help me analyze things? I bought Quicken and so far have been unable to get a decent asset allocation out of it. I just tried exporting everything from Quicken and then importing into Morningstar, which took almost half an hour, then found that I will either have to enter the values of the 15 funds manually each time, or pay $17/month to view the xray from the portfolio manager. Any other good options out there?

[jIM_Ohio]

15 funds does not sound so bad. You would have at most 30 inputs (deposits and balance in each) plus the dates for quarter.

Those inputs should provide the portfolio balance for the other post I made if summed correctly.

Those inputs could also provide total dollar value of each fund. That info could then be input to morningstar for an xray. If you have an account with T Rowe Price, they can track all this for free. You just need to input into their web site the funds and account info so T Rowe can extract info from those accounts.

If you are taking the time to do a quarterly analysis, I would spend the time inputting the numbers because when inputting you will do a visual comparison of balances for that fund over last quater and previous year. That would be reason for doing analysis at a high level (correct?)- to see how you were performing- so the input should not be the problem which drives the software solution.

[Broken Arrow]

This may not be the answer you are looking for, but just to throw it out there....

iGoogle has a simple portfolio tracker.

For each account, you would just create separate portfolios.

You'll have to enter each funds for each portfolio (including duplicates). That information can also include the number of shares (which you'll have to update every quarter).

It can also track every transaction you've made if you want to use that feature.

It will do all the basic calculations for you and give you an easy bottom line.

After that, the share prices and portfolio total will be updated for you every 20 minutes.

Won't do any fancy analysis or pie charts or anything though. But my situation is pretty simple, and this freebie is good enough for me.

[jIM_Ohio]

This may not be the answer you are looking for, but just to throw it out there....

iGoogle has a simple portfolio tracker.

For each account, you would just create separate portolfios.

You'll have to enter each funds for each portfolio (including duplicates). That information can also include the number of shares (which you'll have to update every quarter).

It can also track every transaction you've made if you want to use that feature.

It will do all the basic calculations for you and give you an easy bottom line.

After that, the share prices and portfolio total will be updated for you every 20 minutes.

Won't do any fancy analysis or pie charts or anything though. But my situation is pretty simple, and this freebie is good enough for me.

does this reinvest dividends for you, or do you need to put them in yourself?

[Broken Arrow]

Oooh, good question. I checked again, and I believe the answer is: No.

I don't see anything resembling that kind of feature. Come to think of it, no real way to tracking regular dividends either. Looks like it would all have to be done manually....

Just out of curiosity, I also checked Scottrade's portfolio tracker, thinking they may have such features. Surprisingly enough, Scottrade doesn't either....

[jIM_Ohio]

Most trackers do not reinvest dividends, and that is where I think they fall short for hard core purposes.

I track my portfolio's in yahoo. I know I am down worst case 8% right now. I get about 2-5% back in dividends at end of year which boosts my returns (so what I see throughout year is worst case, then I get pleasently surprised in January when I do IRR calculation for previous year.

[Spud]

I've been wondering about this too. I'm also trying to get our investments into Quicken so that they make sense. We also have 6 accounts (maybe 8 now that we had to do a non-deductible IRA for 2007), and multiple stocks/funds and duplication of funds across accounts.

Up until now, I have been downloading my account info from our brokerage firms. I'm wondering if that's a bad way to do it -- that the brokerage firms aren't telling Quicken what it needs to give me the info that I want. So I'm thinking I might have to set it up manually, and simply reconcile my investment accounts like I would reconcile my bank statement/credit cards. The good news about inputting things manually is that I will have a greater understanding of what goes on, and it won't be "And A Miracle Occurred!" and BLAM we have an extra $2k this month. The bad news is that it will take time to do the inputting.

Anyway, Zetta, if you can give me a little time get a little more knowledgeable, I might be able to help you find a solution within Quicken.

[jIM_Ohio]

I had quicken downloading from T Rowe and Vanguard to get a combined IRA./401k analysis 2 years ago. It took no more than 5 minutes to set up (give it login IDs and pwds and I was good to go).