Manage Your Own Portfolio with these Software Solutions

  by Shelley Seagler

The investment industry’s extensive use of financial jargon and legalese makes it easy to feel like you need an expert to succeed. While trustworthy financial advice isn’t a bad idea, paying for a professional investment manager doesn’t guarantee better returns. In fact, the fees that they charge can drag down your long-term performance — each dollar in their pocket is one less dollar that benefits from the magic of compounding interest over time!

Let’s take a look at how to manage your own portfolio and how software can help ease the burden by simplifying certain tasks.

Portfolio Management 101

Portfolio management boils down to deciding on a target asset allocation and making the purchases and sales necessary to maintain it. According to Vanguard, asset allocation accounts for about 88 percent of volatility and returns, which makes it the most important decision. The specific investments that you choose may not impact volatility and returns, but the expenses associated with them can significantly impact your return potential.

Portfolio management is an ongoing process. You should revisit the portfolio to determine if your target asset allocation has changed or the portfolio has drifted and make any necessary adjustments on a regular basis. For example, you may want a more conservative portfolio as you approach retirement. You may also need to make adjustments if equities have a great year and suddenly account for too much of your portfolio.

The most common way to manage a portfolio is to come up with an ideal asset allocation and purchase low-cost index funds to build it out. Funds of funds, such as target-date retirement funds, make the process even easier by automating the process of determining asset allocation, finding the right funds and even rebalancing the portfolio. Robo-advisors provide similar assistance in building a portfolio based on your target asset allocation.

Software Can Help

The first step in portfolio management is determining the right asset allocation. While there are some common suggestions, such as the “100 minus your age in stocks” rule of thumb, there is no such thing as one right answer for everybody. The proper asset allocation depends on your risk tolerance, investment experience and other factors that change over time. Fortunately, there are questionnaires, calculators and other tools to help you find the right option for you.

Download our free Checklist of Popular Asset Classes & Associated ETFs to find the right options for your portfolio today!

There are several tools that you can use to help:

  • Vanguard’s Investor Questionnaire: Vanguard’s Investor Questionnaire is designed to help you determine your optimal asset allocation based on your risk tolerance, retirement needs and other factors. After answering a series of questions, you can see a recommended asset allocation and explore others.
  • Portfolio Finder: PortfolioCharts’ unique tool searches every possible combination of asset and identifies the historically least painful ones to meet your requirements. Risk-averse investors will appreciate their Ulcer Index as a way to avoid assets that are likely to experience painful drawdowns over time.
  • Asset Allocator: Merrill Lynch’s Asset Allocator tool helps you choose an asset allocation that best represents your portfolio goals and risk tolerance levels, and then helps you compare your current portfolio to the target allocation. The service also provides suggestions to help you rebalance your portfolio when needed.

The next step is screening for investments that meet those criteria to fill out your asset allocation. While you can purchase individual stocks and bonds, most investors prefer to buy and sell indexed exchange-traded funds (ETFs) since they’re automatically diversified, relatively inexpensive and highly liquid compared to other individual investments. However, high net worth investors may prefer to purchase individual stocks and bonds to meet certain goals.

There are several tools that can help you filter down the tens of thousands of ETFs to find the options that are right for your portfolio:

  • ETFdb: ETFdb is a screener that helps you narrow down your choices when looking for specific funds. You can easily find lists of funds by asset class and screen them based on their fund flows, returns, assets under management, expense ratio, dividends or a variety of other factors to find the perfect option for your portfolio.
  • Portfolio Visualizer: Portfolio Visualizer’s Fund Screener is a great way to find funds based on their type, asset class and expense ratio and sort them by returns or risk metrics, such as the Sharpe Ratio, Sortino Scores or volatility. The website also provides a variety of other tools to run simulations and accomplish other tasks.

The final step is buying and selling the investments and tracking allocations over time. Many brokers provide basic tools to trade and track investments, but there are several third-party services that can connect different platforms and provide a comprehensive picture. Some of these platforms also provide third-party advice that you can use to answer questions along the way when building your own portfolio.

Popular investment management platforms include:

  • Personal Capital: Personal Capital provides free online money management tools and optional insight-driven advisory services. You can link all of your accounts and easily check up on asset allocations, analyze retirement savings and decide what changes need to be made in your individual investment accounts.
  • SigFig: SigFig pulls data from investment accounts from more than 80 different brokers into a single dashboard, and sends weekly email summaries of investment performance, news that impacts your portfolio and more. 

Building an Income Portfolio

We’ve talked a lot about building a passive index portfolio, but what about building an income portfolio? While fixed-income investments, such as bonds, are one option, there are many other options that you may want to consider.

Don’t forget to download our free Checklist of Popular Asset Classes & Associated ETFs to find the right options for your portfolio today!

Snider Advisors specializes in helping investors build and manage income-producing portfolios using stock options. The Snider Investment Method is a long-term strategy designed to create income from your portfolio and ensure cash flow in retirement using a combination of stocks, options and cash with specific techniques applied in a specific sequence. Our free Covered Call Screener makes it easy to find these kinds of opportunities.

Our Lattco software makes it easier than ever to automate The Snider Investment Method and spend less time trading. With pre-filled trade suggestions, one-click access to option chains and everything located in one place, it’s easy to place trades in minutes rather than hours. You can also avoid costly mistakes, like placing trades in the wrong accounts or buying to open an option rather than writing a covered call.

The Bottom Line

Portfolio management sounds complex, but in reality, it’s easier than you might think with the rise of low-cost index funds and helpful software. With Snider Advisors, you can even automate complex strategies, such as writing covered calls for income, without worrying about spending hours behind a computer screen calculating and entering trades.

Sign up for our free e-course or get started with Lattco today!

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