Portfolio Tools

Create a portfolio at  Morningstar

Calculate portfolio risk  at Riskgrades

Calculate risk and optimize your portfolio at FinPortfolio

Rebalance your  portfolio to meet retirement goals with specified risk at FinancialEngines


Asset Allocation Calculator at  
Smart Money

Decide which portfolio is right for you at Schwab

Great article on asset allocation at fundadvice.com

Portfolio Design

Asset Allocation:

The first step is perhaps the most important and often ignored - how you allocate your assets. 

Asset Allocation is how to slice up your portfolio between the three asset classes -stocks, bonds, cash and is driven the investor's tolerance to risk, the time frame and the target return needed to achieve objectives. Asset allocation is about how to diversify among different asset classes and maximize return for a given level of risk. 

The idea is not to be overexposed to any one kind of investment. In a diversified portfolio risk is reduced because the different investments go up and down at different times. See an excellent article from U.S. Global Investors.

One rule of thumb is % of stocks in your portfolio is 100 minus your age. If you are 30, you ought to be 70% in stocks.

Examples of Asset Allocation are given below. Other examples are available at Kiplingers.

Gary Brinson, a famous money manager likes to consider the following asset classes in a diversified portfolio: Stocks, Bonds, Money market, Emerging market stocks, Emerging market debt, Private Equity, Real Estate and High yield debt.

Asset Allocation for retirees may include fixed and variable annuities in addition to mutual funds. See annuityfyi.com for information on different types of annuities.  See cnnmoney.com and Forbes article on annuities. Use immediateannuities.com to find out 

a) the amount to deposit for a monthly dollar amount you wish to receive monthly.
b) The monthly dollar amount you will receive for a certain deposit.

Best Funds

The "30's and 40's" portfolio is shown below as an example.  

The next step is to choose funds to fit into each asset class. The process of narrowing down the funds begins...
 
a. In this example, we decide on only having Open-end funds in our portfolio.

b. We decide on having index (passive) funds to represent the Large-Cap and Bond portions of the portfolio and use active funds for the Small-cap and International part of the portfolio.  

Note: There are several approaches here: Use only index funds, Use only actively managed funds or a Core and Satellite approach that uses both.

If the time frame is shorter or we have a lower risk tolerance we would have opted for a larger bond/cash exposure (15% currently).

c. We look at Top funds sorted by 5yr returns which are found at Bloomberg.

d. We decide on not paying a load (use only no-load funds).

e. We choose a few funds in each category (example large-caps) and research them for  

Fund Risk/Return examples: Returns (tax analysis), Risk (standard deviation, Sharpe ratio) 
Fund Expenses examples: load, expense ratio
Fund Details examples: style box, assets, after-tax returns, tenure of manager. 

Check out the Fund Tools area for help.

f. The table and the pie-chart below is an example of funds selected and $50,000 allocated for the hypothetical "30's and 40's" portfolio. 

Ways to create a diversified portfolio:

1. Use ETF's

2. Use Closed-end funds - they have a fixed number of shares and are publicly
    traded on the stock exchanges. You need to pay commissions to purchase them.
   They sell for a premium (NAV less than market price) or a discount (NAV
    greater than market price).

3. Use Open-end mutual funds

4. Create your own portfolio. Several sources for stock selection screens, for
    example, Validea.com 

5. Create a portfolio at FOLIOfn. A folio is a basket of securities and you can
    choose from pre-packaged Folio’s or customize them. 

6. Use a fund of funds such as one from FundX.