The stock portfolio tracker is one of the most transformative tools for long-term investing success. As open banking enforces consumers’ ownership over their data, private investors can now link their investment portfolios to innovative stock portfolio trackers, whereas previously they were stuck with their broker’s outdated, rudimentary user experience.
Stock portfolio trackers come in different shapes and forms. What they have in common, however, is that they bring major innovation to the personal long-term investing experience. The best portfolio trackers comprise powerful features that help investors make more informed decisions and ultimately enhance their returns.
In this article, we discuss five compelling ways how private investors can boost long-term investing returns with best-practice stock portfolio tracking.
1. Tracking high-level portfolio indicators through a stock portfolio tracker
The average investor portfolio has historically held around 20 holdings in their brokerage accounts. In addition to their brokerage account, many investors also own one or several retirement accounts. This adds up to a lot of holdings, having to be tracked.
The most advanced portfolio trackers will let you view all of your accounts combined as a single portfolio once you have securely linked them to the portfolio tracker app. The ability to see the full picture is one of the most crucial factors for a successful long-term investing journey.
The best portfolio trackers will let you monitor your investment portfolio from a bird’s eye view.
They enable you to monitor portfolio risk by aggregating your stocks’ individual risk levels.
Portfolio income is a critical parameter for income investors. An advanced stock portfolio tracker will let you track how much income a particular portfolio, or all your investment portfolios combined, generate for you.
The best stock portfolio trackers will even help you track portfolio quality and certain key performance indicators, such as profit growth and profitability, at the portfolio level.
By monitoring these indicators at the portfolio level through time, private investors can level up their long-term investing game in an easy and convenient way. For example, if portfolio risk was to increase to levels that the investor is uncomfortable with, he or she can take countermeasures to bring portfolio risk back down to levels that are more in line with the investor’s comfort zone.
2. Maintaining a well-diversified portfolio
Investment portfolio diversification is a foundational principle for optimizing returns while mitigating risks. Through a stock portfolio tracker, investors can easily visualize their portfolio allocation by stock, industry and in some instances even stock rating.
Through well-designed graphical illustrations, investors can identify over- and underexposures in their portfolio. An imbalanced portfolio can lead to unnecessary risks as well as missed opportunities. Too much exposure to a single stock can jeopardize portfolio performance, if the stock suddenly drops disproportionately. Inversely, the lack of exposure to an industry with particularly strong growth prospects can limit long-term investing returns.
Some platforms provide optimization tools, such as a portfolio simulator. These can help investors rebalance their portfolios to stay on track towards reaching their long-term investing objectives.
Diversification can help smooth out returns over time. While it may limit the potential of extremely high returns (since you won’t be fully invested in the best-performing asset), it also limits the potential for extremely low returns (since you won’t be fully invested in the worst-performing asset). Suffering a big setback in portfolio value is the worst case scenario for any investor. So a well-diversified portfolio is the foundation for consistent, long-term investing results, free from major drawdowns.
3. Select a stock portfolio tracker with real-time alerts
The investment world and stock markets are dynamic, with market conditions changing by the minute. So, some degree of monitoring is crucial. But it’s unrealistic for investors to be glued to their screens all day.
In fact, there’s no need. Certain stock portfolio trackers will let you implement alerts for various important aspects of portfolio management. For example, a portfolio diversification alert will be triggered, if a given stock hits a specific, pre-defined maximum share of your portfolio.
Alerts for specific price levels of a stock can also be extremely useful to not miss attractive entry and exit price levels. More experienced, valuation-focused investors will find alerts on price to earnings ratio’s useful.
By setting and receiving alerts through their stock portfolio tracker app, investors can make timely investment decisions – whether it is to ensure they seize opportunities or mitigate potential losses. On balance, thereby enhancing overall returns.
4.Beware of bad apples and deteriorating business performance
As portfolios increase in size, the risk of holding on to bad apples goes up. This risk is accentuated for investors owning multiple investment portfolios, who will find it particularly difficult to keep up.
Companies’ business performance can change fast, for better or worse. Competitors may pull ahead. Poor management decisions or unfavorable industry dynamics may drag down business performance. An advanced stock portfolio tracker will provide you with a means to easily track the quality of your stock holdings. Specifically, a quantitative stock score or rating is a great way to reflect a stock’s quality through a single indicator.
The best stock portfolio trackers will even let you track your company’s key performance indicators over time. This rare but invaluable feature will let you track your companies’ business or financial performance through time versus the levels when you initially purchased a stock. For example, imagine back in February 2021, you purchased some Apple stock (after doing your research). At the time, Apple’s net margin was 21% and revenue growth was 6%. In order for the stock to appreciate and create value, you want these financial KPIs (key performance indicators) to improve over time. The best stock portfolio trackers will have a feature that lets you monitor Apple’s progress (or lack thereof). Unless you took a note at the time of the trade or benefit from eidetic memory, after two years owning Apple stock, you will find it extremely difficult to determine whether Apple actually improved on their key profitability and growth metrics.
Linking your investment portfolio from Robinhood, Charles Schwab or Fideliy to a free portfolio tracker gives you the opportunity to immediately see the weakest link among your stocks. Furthermore, it lets you track whether your companies’ business performance is improving overtime, which is the main prerequisite for the stock price to appreciate.
5. A stock portfolio tracker app is on your side, free of conflict of interest
Contrary to an independent platform offering tools to manage your investment portfolio more effectively, your broker’s business model is beset with conflict of interest.
Your broker gets paid when you trade. Your broker may tell you that trading is free, but there’s no such thing as a free lunch. Rather than through commissions, your broker gets paid by the market maker to whom they direct your order. In simple terms, the market maker in turn will make money by taking a cut on the price at which it sells you the stock. So, in essence, the price you pay on your transaction is the difference between best price execution and the execution price the market maker gives you.
The nature of its business model drives the broker to focus on getting you to transact more than you actually have to, even when it isn’t necessarily your best interest. By contrast, a stock portfolio tracker is solely designed to help you achieve your long-term investing objectives. Therefore, it is crucial that private investors recognize and keep in mind these dynamics to make informed investment decisions.
Conclusion – Enhancing long-term investing return with a stock portfolio tracker
In a rapidly evolving financial landscape, having the right tools is paramount for long-term investing success. The stock portfolio tracker, with its multitude of capabilities, stands out as an indispensable ally for the modern investor. From providing comprehensive data at a glance to enabling informed asset allocation and managing risk, the benefits are manifold.
By integrating a stock portfolio tracker into their investment process, investors can ensure they’re not only keeping up with the times but also positioning themselves for maximized returns. The future of investing is here, as open banking paves the way for innovation in the investing space.