What’s the Best On-Line Portfolio Manager to Track my Investments, part 2 of 5

mrmoneybags

In this installment I’m going to take a look at what the big web portals have to offer. But first I want to review how returns are calculated and what you should be looking for from those numbers.

Calculating Your Returns

There’s a lot of ways to calculate your returns, but unfortunately all these web sites use the simplest of methods: Total Return. Basically, they compare the ratio of your gains (or losses) to your costs without taking time into account. This is fine if you bought all your investments in one shot (at least on the same day) and now you’re going to sit back and watch them.

Pass the popcorn!

In reality you want to know your annualized return. Which is a fancy way to say you want to your average annual return. Except it’s not as easy as dividing the Total Return by the number of years you’re invested (that would be the simple or arithmetic average – and it’s the wrong way to annualize your returns). A better way would be to calculate your geometric average or compound return.

But there are even better ways: Money-Weighted or Internal Rate of Return, Time-Weighted or Linked Internal Rate of Return, Modified Dietz Rate of Return, or the Daily Valuation Method. The best would be the Daily Valuation Method, but unless you have a super-computer you won’t be calculating this one.

Of all these probably the best compromise between efficiency and accuracy is the Modified Dietz Method (also known as Approximate Time-Weighted Rate of Return). Once you’ve calculated that for each period (monthly, quarterly, or annually) you can link it together geometrically to see your annualized return over the years.

Once you know your annualized rate of return you can properly compare your investments and see which ones really are doing well, and which ones just sound good.

For more details on the calculations, PWL Capital has a great white paper on on How to Calculate your Portfolio’s Rate of Return.

Now hopefully one of these web sites, at least the ones that track dividends, take all that information to calculate a proper annualized rate of return.

The Portals

These are the big internet sites where a lot of us start our day. They bring a lot together, like news and weather, functionality like web searches, e-mail and calendars, and more. Adding a portfolio to that isn’t a stretch but since it’s not their focus we might not expect anything exciting from them, but we hope that with everything else going there’s going to be some interesting integration – like easy searches, e-mail alerts, and social sharing.

Google

They nailed the user experience with a clean and simple design that puts more data onto one page than any other site, and there’s even a gadget for my iGoogle home page and functions for my Google DocsDrive Spreadsheets. The charts are perfection: I could configure my own default settings and with one click I could expand the chart to the full width of my screen. But they blew it on data since dividend information for Canadian stocks (ETF’s in particular) is sometimes missing, in-complete, or just plain wrong!

MSN

They have one of the nicest portfolios – it’s actually a Silverlight app so it better be slick! But the rest is held together with duct tape and bubble gum. And basic information for Canadian stocks – even blue chip stocks – is frequently missing. The initially beautiful web site falls apart just below surface.

Yahoo

This is what you’d expect from a web-base portfolio. It looks nice, but the functionality is pretty basic and regrettably dividend information is often missing for Canadian stocks and the news is U.S. focused. Since Yahoo has fallen on hard times they’re probably not putting a lot of effort into something you can get everywhere else, so unfortunately I have to recommend you go somewhere else!

In the next installment I’ll take a look at what the news outlets have to offer. While some are astounding there are a few stinkers in the bunch!

Part 1 – Introduction
Part 2 – Calculating Returns and The Portals
Part 3 – News Outlets
Part 4 – Financial Services and Brokerages
Part 5 – Comparison Table and Conclusion

Cross-posted on Schultzter’s Blog

Disclaimer The material in this article does not constitute advice and you should not rely on any material in this article to make any decision or take any action.

10 comments

  1. Pingback: What’s the Best On-Line Portfolio Manager to Track my Investments, part 1 of 5 | 2FatDads

  2. It doesn’t matter if you have an advisor or DIY, you can still track your investments and your portfolio on-line.

    And understanding how your returns are calculated so you can compare them with other returns (i.e.: benchmarks) is essential too – regardless of how you invest.

    I don’t – and won’t – recommend DIY to anyone. But if that’s what you decide to do then one of the tools being presented here could be even more useful than if you have an advisor.

  3. Great run down.

    Now help me understand “Modified Dietz Method, AKA, Approximate Time-Weighted Rate of Return.”

    Let’s say I bought at: 5, 5.50, and 5.75 over 12 months. Current share price is 6.

    5 + 5.5 + 5.75 / 3 = cost average 5.42 – 6 = 0.58 gain or 10.7%

    Is the missing info the dividend/distributions that received over the time I had the shares?

  4. Your return is how much money you’ve made (or lost) over time – not the change in the unit price. So you have to consider the cash flows: your initial purchase, all the dividends, and how much you’d get if you sold it now (the current market value), and you have to take time into account. Time is an important factor when you calculate your returns. You can’t just say “I doubled my money, this investment is amazing” if it took 20-years!!! When you factor time into the equation you can compare a stock that you’ve held for years vs. a stock you bought last month.

  5. So, to recap – using my basic example, my annualized return is 10.6% but if nothing happens over the next year (it remains $6 at year end), my annualized return drops to 5.3% (baring that my stock has no dividends or special payouts).

  6. Pingback: What’s the Best On-Line Portfolio Manager to Track my Investments, part 3 of 5 | 2FatDads

  7. Pingback: What’s the Best On-Line Portfolio Manager to Track my Investments, part 4 of 5 | 2FatDads

  8. Pingback: What’s the Best On-Line Portfolio Manager to Track my Investments, part 5 of 5 | 2FatDads

  9. I think Beatthebenchmark.net is pretty decent tool. I use Bloomberg myself but even Bloomberg doesn’t provide some functions available there. No intraday trading activity though, I think it only allows for daily portfolio evaluation, but that’s enough for me.

  10. There are many options if your portfolio is very simple. But long term analysis of portfolio performance is a problem if you trade different asset classes or have long/short positions as well as trade foreign stocks and want to see detailed statistics of your portfolio. Google finance is the best I have seen. Beatthebenchmark.net very good as well. I think that there is even more analysis available than in google.