For self-directed investors, picking the best portfolio tracker represents the key factor for long-term investing success.
The accuracy of investment decisions depends on the quality of insights gained from your portfolio tracker. Your ability to stay on track is powered by its optimization and planning tools. And innovative monitoring features are your ticket to a good night’s sleep.
So the choice of the best portfolio tracker is arguably the most important decision on your long-term investing journey. In this article, we put together a list of the ten most important selection criteria when choosing the best portfolio tracker for your needs.
What is a portfolio tracker?
A portfolio tracker is a tool or software used by investors to monitor and manage their investments across various asset classes like stocks, bonds, mutual funds, ETFs and others. It provides investors with a consolidated view of all investment holdings, allowing them to see their entire portfolio in one place. With stocks being the dominant asset class in most portfolios, the best portfolio trackers also provide high-quality stock research tools and data.
The best portfolio trackers go full circle
At its core, the portfolio management process can be broken down into three basic stages: Insights, optimization and monitoring. The best portfolio trackers will provide you with innovative tools for all three of them.
Portfolio insights
Investment portfolios are dynamic by nature. It is crucial to properly track them through a comprehensive 360° view. Well-designed portfolio insights will help you to know when it’s time to make changes to your portfolio so that you stay on track to achieve your long-term investing goals.
Portfolio optimization
Whether it’s making changes to your existing portfolio or adjusting for in- and outflows, all investment decisions should be consistent with your initial plan. Optimization tools, such as a portfolio simulator, are instrumental to this. For example, if you’re an income investor, you will want to maximize your investment income for a given risk level. If you are a growth investor, you will want to make sure that your stocks stay on their growth path. As you approach retirement, your focus may shift to de-risking your portfolio.
Portfolio monitoring
Once you’ve optimized your portfolio, it’s time to put in place proper portfolio monitoring to avoid and minimize setbacks. The most important parameters to monitor are portfolio diversification, portfolio risk, portfolio quality and portfolio income.
The 10 must-have features in a portfolio tracker
Here’s a list of 10 must-have features that you should have in hand when picking the best portfolio tracker for your needs. Since all investors and their individual situations are different, some of these feature will be more important to you than others. Still, a long-term investor should not settle for less.
1. Investment account aggregation
With open banking giving ownership over their investment portfolio data to the client, investors can now link their investment portfolios to independent and innovative investing platforms, such as portfolio trackers. Specialized service providers, such as Plaid, and progress in authentication technology (OAuth) make this process is fully secure. Being able to link all of your investment accounts should be one of your top priorities for effective portfolio tracking.
The combination of a lack of innovation on the part of brokers and the continued progress in open banking has laid the ground for the launch of innovative portfolio trackers by independent third party investment solution providers. This trend is highly beneficial for the private investor. Third party apps, like Ziggma, not only bring innovation to the marketplace, but they are also free from conflict of interest (unlike your broker which gets paid when you trade, for better or worse).
Since investment portfolios can be very heterogeneous, you should be mindful of the data quality of the portfolio integration. Does it handle properly hand bond prices? Does it cover mutual funds? What about alternative asset classes? The best portfolio trackers will distinguish themselves through the quality of the data integration. They flawlessly handle different asset classes and currencies.
For convenient and effective portfolio tracking, being able to link your investment accounts to your preferred portfolio tracker platform is an absolute must have. If you own multiple accounts, the best portfolio trackers will provide you with a consolidated overview across all your investment portfolios, as if there were a single portfolio.
2. Portfolio-level analytics
Smart portfolio analytics and relevant insights are another must-have component when choosing the best portfolio tracker for your long-term investing journey. The accuracy of your investment decisions depends on it.
Long-term investing success requires the ability to monitor performance and make appropriate adjustments as needed. The best portfolio trackers will not only enable you to track the performance of your overall portfolio over time, but also help you uncover the sources of risk and underperformance.
Another important selection criteria is the ability to view all of your brokerage and retirement accounts combined as a single portfolio in your portfolio tracker. The need to see the full picture cannot be over-emphasized.
The portfolio tracker of your choice should provide you with a dashboard comprising key performance indicators at the portfolio level. These should cover overall portfolio quality, yield, risk and income.
3. Performance at Portfolio and Holdings Level
The ability to track and analyze performance both at the portfolio and at the individual stock level must sit at the core of any portfolio tracker. Investors need continuous insights into how their investments are doing relative to your expectations.
By tracking performance at the portfolio level, you can gauge the effectiveness of your investment strategy and investment decisions. The insights drawn from this analysis will enable you to make informed investment decisions in the future and stay on track to reach your investment objectives.
Tracking performance at the holding level is equally important. The ability to tracking capital gains and losses at the holding level gives you the ability to maximize tax efficiency through tax loss harvesting. Tax loss harvesting consists of selling securities at a loss to offset a capital gains tax liability. This can lower the current year’s taxes by recognizing losses that can be used to counterbalance capital gains from other investments.
Like institutional investors, private investors do well by making sure that their portfolio companies progress and improve over time. When you buy a stock in a company, it seems obvious that you want it to become more profitable over time and its profit growth to rise (the pre-requisite for a company’s share price to go up). Yet, very few private investors actually track whether the companies they own get better relative to the point in time when they bought shares in them. For most, the process is simply too time-consuming.
The best portfolio trackers in the market arched will provide you with intuitive tools to make tracking your companies’ business performance as easy as it is for institutional investors.
4. Dividend Tracker
A dividend tracker helps investors monitor and manage their dividend income from investments in stocks, mutual funds, ETFs, or other dividend-paying assets. It is designed to keep track of the dividends that are paid out, when they are paid, the amount, and any changes in dividend payouts.
One key benefit of a dividend tracker consists of income management. A good dividend tracker lets you monitor exactly how much you’re earning from dividends and how much each individual investment contributes to your overall investment income. This visualization gives you a valuable understanding of your income split.
Great dividend trackers will also display payment schedules so that you can know exactly when to expect incoming payments to hit your accounts. One benefit of this is that you can quickly reinvest dividend to maximize compounding effects.
Many dividends are subject to withholding tax. Some of the more advanced dividend trackers let you compute your total withholding tax in relation to dividends, thereby greatly facilitating your tax reporting.
When looking for the best portfolio tracker, an advanced dividend tracker should be a key selection criterion for any investor, particularly income investors.
5. Stock research tools
The vast majority of investment portfolios contains stocks. This makes a lot of sense since stocks have historically been the largest performance driver of any asset class.
Investors who hold stocks should pay close attention to a portfolio tracker’s offering regarding stock research information. After all, you want to be able to view and research your portfolio companies’ financial performance, including how it compares to its peers. If you don’t have this information, ideally presented in a digestible format, you will end up flying blind.
These are some of the key questions to answer:
++ Do I get high-quality financial information for fundamental analysis?
++ Is the financial information presented intuitively so that I can research stocks efficiently?
++ Does the platform have well-designed stock ratings?
++ Is there a powerful screener with a great user experience?
There are many great companies out there, creating substantial value for their shareholders, and society as a whole. It makes perfect sense to own stocks. To own the best of the best, make sure your portfolio trackers provides you with a high-quality stock research offering.
6. Portfolio monitoring tools
Keeping up with an investment portfolio can be time-consuming. Fortunately, some of the more advanced portfolio trackers provide elegant solutions for this problem. They let you automate the monitoring of the most relevant portfolio tracking and management parameters, such risk, diversification and portfolio quality.
For example, in line with best practice, you carefully monitor your portfolio diversification. In doing so, you don’t want a single stock to account for more than 10% of your portfolio. Rather than having to check your account daily in order to make sure that this does not occur, some of the best portfolio trackers out there will let you set an alert at that the 10% threshold. Their system then takes over the monitoring for you. You won’t have to worry about a thing because your portfolio tracker keeps close tabs on your portfolio diversification. If and when the event occurs, you will get notified so that you can make the necessary adjustments.
In addition to diversification alerts, certain portfolio trackers will also enable you to automate the monitoring of stock price levels and even valuation levels. Rare is the investor who has never missed their pre-determined exit point of a stock that first rallied and then sold off. With price alerts in place, there is no risk of this happening.
Well-designed portfolio monitoring tools will save you lots of time and stress. You should most definitely expect technology-enabled monitoring tools from a good stock portfolio tracker.
7. Transactions
Easy access to transaction records is another critical asset of a top tier portfolio tracker. Many brokers will make it unnecessarily difficult for you to access transaction records whereas, in fact, it should be straightforward to visualize your dividends, taxes withheld, fees or and sell transactions.
Portfolio trackers that make it easy to view the sum of dividend income received and tax withheld. This can save investors many hours of precious time. The best portfolio trackers will even help you optimize your tax bill through tax loss harvesting.
Reviewing past transactions can offer valuable lessons by highlighting successful and unsuccessful investment choices. This analysis leads to better decision-making, helping investors avoid previous mistakes and replicate investment decisions that yielded positive results.
8. Pricing
Affordability is another must-have characteristic because what you pay in fees diminishes your return. The cost of a good portfolio tracker can vary depending on the features, functionality, and level of sophistication. Some basic portfolio tracking features may be obtained free of charge. These will provide essential tracking and reporting features, which might be sufficient for new investors or those with a simple portfolio.
More advanced portfolio trackers with additional features like real-time updates, tax optimization tools, and advanced analytics typically charge a monthly or annual subscription fee. These can range from a few dollars to over a hundred dollars a month.
Ultimately, the right cost for a portfolio tracker depends on your specific long-term investing needs and the nature of your investment portfolio. The benefits are undeniable. By employing your portfolio tracker’s features effectively, you have the ability to stay on top of your investments at all times and avoid setbacks that can take years to make up.
Even the best portfolio trackers today are priced at levels that are affordable for the vast majority of investors. Massive progress in technology has brought cost down immensely. Consider also that contrary to asset management fees, which are indexed to the value of your investment portfolio, the subscription fee of a portfolio tracker is fixed. Consequently, the larger your investment portfolio becomes, the lower the share of the cost of the portfolio tracker will be.
9. Overview of the market action
As you track and manage your portfolio, it can prove useful to follow the daily market action and direction. Yet, you should not have to jump to a different platform to get the gist of what is going on in the market. Rather, you should expect a real-time overview of top movers and news from your portfolio tracker.
Big swings in certain stocks, interest rates or asset classes can be indicative of events that may also impact what you own. While traders may use real-time market tracking for short-term decision-making, long-term investors can gain an edge by actively following markets to get a deep understanding of market cycles.
Therefore, the ability to track the markets closely should be a key decision-making factor in your selection process of the best portfolio tracker.
10. Customer support and community insights
No big data application can claim 100% data accuracy. Portfolio trackers integrate data from multiple sources and are thus dependent on third parties’ data quality.
To quickly solve any data quality issues you may run into, investors should consider knowledgeable and reactive customer support as another must-have feature of a great portfolio tracker.
Conclusion: Don’t settle for anything less than the best portfolio tracker
Selecting the best portfolio tracker for your needs represents hands down the most important decision you will ever make on your long-term investing journey.
Do not settle for second or third best.
All of your future investment decisions depend on it.
Staying on track to reach your investment objectives depends on it.
And, your ability to prevent major setbacks is contingent on your portfolio tracker’s insights and monitoring tools.
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