The Groovy Portfolio Tracker (Tracker for short) consists of two tabs: Portfolio and Allocation Helper.
The Portfolio tab (PT for short) is used to record your current investment accounts and investments. In column A, the PT is divided into two categories: Stocks and Bonds/Cash. Each category, in turn, has space to enter a number of different asset classes (column B). In the sample data provided, the Stocks category has the following asset classes.
- US Large Cap
- US Mid Cap
- US Small Cap
- Real Estate
The Bonds/Cash category has the following asset classes.
- US Short Term
- US Intermediate Term
- US Long Term
Column C of the PT (Asset Name) is where you enter the name of your investments. Column D (Ticker Symbol) is where you enter the ticker symbol of your investments (if applicable). Column D (Location) is where you enter the investment account that houses your investments. And column E (Amount) is where you enter the current value of your investments.
How to Use the Portfolio Tab
To use the PT, begin by entering all the asset classes you’re currently investing in. If you’re not sure what asset class a particular fund represents, go to Morningstar and enter the fund’s ticker symbol. Here, for example, is what Morningstar produced when I entered the ticker symbol of my Vanguard S&P 500 index fund (VOO).
After you’ve determined the asset classes of all your investments, make the appropriate updates to the Asset Class column (column B) in the PT. The sample classes I provided, will probably cover most of the classes that your investments represent. If my sample classes don’t, simply change them. For example, you may not have an energy fund, which I flagged as a commodity asset. You may have a couple of individual stocks. If this is the case, simply go to the Cell B32 and substitute Individual Stocks or Gambling for Commodity.
Once you determined all of your asset classes for Stocks and Bonds/Cash, enter all your investment information in the appropriate class bracket. The below screenshot shows the sample investment information for the US Large Cap asset class.
If you need to add a row to an Asset Class bracket because you have more than five investments in that Asset Class, simply highlight the last row in the Asset Class bracket by clicking the row number to the left of column A. In the screenshot below, row 6 has been highlighted. Put the cursor in the highlighted row and right-click your mouse. In the context menu that appears, select Insert 1 above. A new row will be added to the Asset Class bracket.
Okay, you’ve entered all your existing investments in the PT. What if there are some additional asset classes and funds you want to buy in the future? Should you enter those as well?
Getting an asset allocation that works for you, is a process. It’s not going to happen overnight. For instance, Mrs. Groovy and I don’t have any money invested in short-term bond index funds. At some point, hopefully before interest rates begin to rise, that will change. So we included this asset class in our PT. Having it in there certainly doesn’t hurt anything. But more importantly, as you will see when we discuss the Allocation Helper tab, having it in there is essential to making all your investment accounts behave as one cohesive unit.
A Brief Note on Asset Allocation
Asset allocation isn’t easy. Talk to Jack Bogle and he’ll tell you need only two asset classes and for a satisfactory asset allocation. Here they are.
|Stocks||US Total Stock|
|Bonds||US Total Bond|
Ric Edelman, on the other hand, believes that satisfactory asset allocation requires many more asset classes. I went to his website and ran his portfolio selection app, and given my age and risk tolerance, it returned a portfolio with 20 asset classes. Here they are.
You can definitely go crazy when it comes choosing asset classes for your portfolio. My advice is to err on the side of fewer asset classes. But you got to find a number that works for you. So more than anything else, start learning about asset allocation. Here are some links to get you started.
- Bill Schultheis’s Coffeehouse Portfolio
- Rick Ferri’s Core-4 Portfolio
- Paul Merriman’s Tax-Deferred ETF Portfolio
- David Swensen’s Ivy League Portfolio
- Motley Fool’s Model Portfolio
- Ray Dalio’s All Weather Portfolio
How to Use the Allocation Helper Tab
The second tab in our Tracker is called the Allocation Helper tab (AHT for short). You use this tab to 1) analyze the current asset allocation of your portfolio, and 2) determine what adjustments are needed to get your portfolio aligned with your desired asset allocation.
Columns B and C (Asset Class and Current Amount) on the AHT are tied directly to the information you entered into the PT. Any changes you make to the asset classes and investment amounts on the PT will be automatically reflected here.
Column D (Current Allocation Percentage) on the AHT shows what percentage an asset class is of a particular portfolio category. In the sample data provided below, the US Large Cap asset class makes up 29.14% of the stock category.
Column E (Target Allocation Percentage) on the AHT indicates what percentage you want an asset class to be of a particular portfolio category. In the sample data provided below, the target allocation of the US Large Cap asset class is 40% of the stock category.
Column F (Rebalance Amount) on the AHT shows what has to be added or subtracted from an asset class so that that asset class meets your specific target allocation. In the sample data provided below, the rebalance amount of the US Large Cap asset class is $5,428. This means $5,428 has to be moved from other asset classes to get the US Large Cap asset class in balance.
To use the AHT, begin by entering your desired split between stocks and bonds/cash in cells E9 and E18 respectively. In the above sample data, my desired split between stocks and bonds/cash is 50-50.
Once you determine what split between stocks and bonds/cash works for you, you now have to determine what percentage of your stock and bond/cash categories your various asset classes should be. In the above sample data, the asset classes for the stock category have the following percentages.
- US Large Cap: 40%
- US Mid Cap: 10%
- US Small Cap: 10%
- International: 20%
- Real Estate: 10%
- Commodity: 10%
Now that you have determined your target asset allocation, you use column E (Rebalance Amount) to guide your rebalance moves. In the above sample data, no asset class in the stock category meets its target allocation. To get them in balance, you buy or sell the amount indicated.
Let’s suppose you want to change your desired target allocation. You want to be more aggressive and get out of a particular asset class. In the above sample data, we have a 50-50 split between stocks and bonds/cash. Let’s move that to a 60-40 split. And let’s dump our commodity asset class and increase the portfolio weight of the real estate asset class. To make this happen, we simply plug in the appropriate numbers. Here are the results.
To achieve a 60-40 split, we have to sell $10,000 from bonds/cash side and buy $10,000 on the stocks side. To get out of commodities and increase our stake in real estate, we have to sell our energy fund and use that money to buy $5,927 worth of our REIT.
Okay, groovy freedomists, that’s the skinny on my Portfolio Tracker. If you have any questions, feel free to email me at [email protected]