by Joe Lan, CFA
Portfolio management software programs are one of the tools most widely used by individual investors. As an investor’s personal portfolio grows over the years, it often encompasses several investment accounts, including 401(k)s, IRAs, brokerage accounts and savings accounts. Tracking all these accounts accurately is an arduous task, and many investors need help. Luckily, the continuing development of technology has led to increasingly powerful portfolio management software aimed at providing just that.
In this issue’s Comparison, we examine three portfolio management software programs—Quicken Premier 2011, Investment Account Manager Version 2 and Fund Manager 11. These three software programs have each made appearances in our previous Comparison articles. They continue to be updated and improved, and we believe they still represent the best portfolio management software programs for individual investors.
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Why Might You Want Software?
The development and expansion of high-speed Internet means that sophisticated tools can now be run from your Web browser. Over the years, Web-based portfolio trackers have become very popular, and there are now significantly more Web-based programs than portfolio tracking software programs. Web-based portfolio trackers offer real-time price updates (usually for a fee) and up-to-the-minute news articles on holdings in your portfolio. The best online portfolio managers can sync directly with your investment accounts, meaning you do not need to enter updates manually. However, while Web-based portfolio trackers are capable tools, software-based portfolio managers still represent a significant upgrade in a majority of areas of functionality.
This comparison is geared toward software-based portfolio management programs (we last compared online portfolio managers in the Fourth Quarter 2010 issue of Computerized Investing, available at www.comput
erizedinvesting.com). Software programs still offer the most powerful performance reporting, and they also offer a better ability to calculate gains and losses. The top software-based portfolio trackers are also able to handle more types of securities and transactions and will almost certainly offer a far greater variety of reports.
Features & Functionality
Most capable portfolio management programs offer similar features. But software is rarely free, so matching your personal needs is a more important issue when choosing software than it is when you are choosing between the free online portfolio trackers.
Our comparison grid on pages 24 and 25 details the features offered by our three top picks.
Costs and Time Commitments
Investing in portfolio management software will inevitably come with certain costs. In addition to monetary costs, you need to consider the time you will spend learning to use the program. What it takes to configure the program, how easy it is to use and how well it can handle your personal needs will eventually become larger factors than the monetary cost of the program.
In order to accurately gauge each program’s (or website’s) strengths and weaknesses, we make an effort to thoroughly use each service. Luckily, two of the three programs we review here offer fully functioning demos, allowing all potential users to try the software for themselves before purchasing (Quicken Premier 2011 does not offer a demo or trial version).
The importance of a program’s ability to handle a wealth of different securities cannot be overstated. When you are looking at a program, especially if you have a long investment horizon, consider not only whether it can handle the investments you currently own, but also whether it will be able to track investments that you may likely own in the future.
Programs that specialize in certain areas, such as options, are available, but for the purposes of this comparison our focus is on programs that support the securities that most individual investors own, including stocks, bonds, mutual funds, exchange-traded funds and real estate.
A program’s ability to distinguish between asset types is particularly important, as it ensures that asset allocation and industry reports will be generated correctly.
The transactions supported by the program are closely related to the types of securities that the program handles. All of the programs discussed here handle standard transactions such as buying, selling and cash dividends. However, the ability to handle data points such as short sales and return of capital is important, and the programs vary in their functionality.
All of these programs allow you to specify security lot assignments for a transaction. This feature can be useful for tax liability issues and for tracking performance. A lot is the total number of units involved in a given trade. If you reinvest dividends from your mutual funds and stocks, you will find yourself tracking numerous lots over a long period of time. Any solid portfolio management package will automatically match buy and sell lots for different accounting strategies for the purpose of reducing tax exposure. The strategies include first in, first out; average cost; and specific lot. Having a program that can handle all three is convenient.
Reports allow you to analyze your portfolio and investments. The three programs covered here vary in the type and flexibility of reporting they offer. When choosing a program, be sure to check whether the program generates not only the types of reports you want, but also other types of reports you may not currently use in your analysis. These extra reports might enhance your overall evaluation of your portfolio. While you want to be sure that a program provides enough flexibility and functionality to complete your analysis, again, you should consider possible future needs with regard to reporting capabilities.
The comparison grid lists the main report types offered by the top portfolio management programs. The current holdings report lays out the composition of your portfolio. At a minimum, programs will list the securities that are held, along with units, costs and current market value. Most software programs will also provide certain asset allocation and gain/loss data right on the main page. The holdings by lots report breaks down portfolio composition into finer increments, indicating each purchase at a specific date and price. This gives you a detailed history of your transactions and provides guidance for selling.
Tax schedules pertain to the Schedule B and Schedule D IRS forms. Designed for computing interest and dividends received from a portfolio, Schedule B reports allow you to estimate tax debt (or credit) before year-end statements arrive. Tax Schedule D reports compute long- and short-term capital gains and match assets that will yield capital gains with tax liabilities. Ideally, the program should also track foreign taxes withheld on your securities to help ensure that proper credit is accounted for when filling out your taxes. Tax reports are provided for a given tax year, so programs generally include a dialog to select the year to report upon. Tax reports can be tricky and, if your situation is complex, it may be prudent to consult with a tax professional. None of these programs specializes in tax reporting, so their capabilities may be limited depending on your investments and trading behavior.
The projected cash flow report serves as a forecast of the expected portfolio cash income from dividends, interest and bond maturities. This report is especially useful for investors who rely heavily on income-related investments, such as investors in retirement. Bond maturity schedules can assist investors in redeploying capital that is coming due.
Report customization can be content-related (for example, allowing you to choose the time period) or cosmetics-related (for example, allowing you to select column and row headings or even font size).
Portfolio alerts let you know when a security has crossed some predetermined price threshold. Such an alert may highlight a need for investigation that might otherwise go unnoticed.
A basic part of the portfolio management process is to determine and analyze performance. The comparison grid summarizes each program’s performance reporting capabilities. Performance reports are discussed more fully in the individual program summaries that follow.
A program should provide reports for securities, industries and asset classes; these reports should include performance and asset allocation analysis. Some programs allow for an examination among various asset classes, while others provide industry, section and individual security breakdowns. Reports covering single and multiple portfolios are important in order to fully address the diversified aspects of all your accounts.
All three programs discussed here also offer reports based on between-period returns, which allow you to monitor security performance during a known market environment. The programs store snapshots of your portfolios at various times and provide information on how portfolios perform during different market cycles.
Certain portfolio management programs offer the ability to calculate both a value-weighted (also referred to as a dollar-weighted) internal rate of return (and a time-weighted rate of return. The IRR tends to be the best gauge because it represents the rate of return earned by your investments. It considers the time when inflows and outflows are made to the portfolio, the amounts of these flows, and the combined impact upon the overall rate of return. The time-weighted return is most often used to analyze the performance of investment decisions made by a money manager. A time-weighted calculation directly ignores the impact of any cash added to or removed from the portfolio. However, inflows and outflows should be considered by individual investors, not only because an individual does have control over them, but also because they are very common in retirement accounts and will have a large impact on the portfolio’s rate of return.
Portfolio software programs are able to download prices and portfolio values from the Internet. Furthermore, they are usually able to directly download transactions and holdings from brokerage accounts, which is an invaluable time-saving feature; however, users must provide their brokerage login information and account number.
Certain programs also allow for data importing without directly syncing with a brokerage account. This method does not require that users provide brokerage login and account information.
Top Portfolio Management Programs
Quicken Premier 2011
Quicken Premier is one of the most well-known personal finance software programs available. The newest version offered includes some significant changes from the 2009 version, which was out when we last reviewed portfolio management software programs in the Fourth Quarter 2009 issue of Computerized Investing. Keep in mind that Quicken Premier is designed as a comprehensive money management tool. Therefore, the program is proficient at handling investment accounts as well as all sorts of banking accounts, including checking and savings.
Quicken has expanded the number of banks and brokerages it can automatically sync to. According to its website, over 12,000 banks and brokerages can be synced to the accounts list in Quicken. Another useful upgrade is that Quicken now automatically categorizes most expenses after syncing with an online account. Furthermore, portfolio values are updated every 15 minutes.
Creating your account is very simple. The easiest way to create an investment portfolio is to add an account and allow Quicken to sync directly with your brokerage account. The setup wizard will walk you through the process. If you do not wish to provide the necessary account information, you may also use the advanced setup function to enter your transactions manually. If you do choose to allow Quicken to automatically sync with your accounts, all of your transactions will be loaded into each account in your accounts list.
When we tested Quicken Premier, the account syncing went smoothly, and account values and transactions were all correctly updated in Quicken Premier for both our checking and investment accounts. Our checking account synced transactions going back three months, while our brokerage account synced transactions back one year (to when the account was opened). For each sale, you are able to allocate specific lots to sell, and you can track interest, dividends, capital gains, stock splits and commissions.
The program can handle cash, stocks, bonds, mutual funds and exchange-traded funds. Unfortunately, there is no support for real estate investments, annuities or user-defined securities. Asset classes are assigned to each investment, but you can change assignments as you see fit.
Quicken Premier offers the most comprehensive listing of reports among the three portfolio management software programs compared here. Nine separate reports are provided for investments, including capital gains, investing activity, maturity date for fixed income, portfolio value, portfolio cost basis, asset allocation, income, performance and transactions.
While these reports are generally self-explanatory, there are a few worth highlighting. The investing activity report displays your interest, dividends, capital gains and realized gains each quarter, quarter-to-date and year-to-date. The report outlines the general trends in income and capital gains through the year, which can be valuable for investors who occasionally want to change their portfolio’s focus in this regard or who wish to see the income schedule of their portfolio.
Quicken Premier’s report showing the maturity date of fixed-income investments is worth noting. Usually, this type of information is provided by a broker only if you have a full-service account. Having this data at your fingertips allows you reinvest your fixed-income capital when it comes due.
Six reports are also available in the tax section. These reports assist users in determining their capital gains and, for those who use itemized deductions, the program provides a Schedule A. A tax schedule and a tax summary are also provided, outlining your investment transactions and their tax consequences.
As previously stated, Quicken Premier is a personal finance management program and offers functions beyond portfolio management. Reports are also available for banking, spending and comparison purposes. Cash flow summaries and itemized spending reports are very useful. Needless to say, purchasing this software will provide users with access to all the reports offered by Quicken Premier.
Investment Account Manager Version 2
Investment Account Manager is a pure portfolio management program, which is slightly different from Quicken Premier. The program costs $139, but there is a $20 discount for members of AAII (see the Special Offers section under Member Benefits at www.aaii.com for more details on the discount). A free 30-day trial is also available that provides a fully working version of the program.
Creating a portfolio is straight-forward, and the program walks you through the process. You are able to download transaction data directly from a brokerage account. The program allows you to choose the time period of transactions to download. The brokerage account that we tested was opened one year ago, and the program downloaded all the transactions made in the account. During our test, the process of downloading transactions was simple and the data retrieved was accurate. You must provide the program with your broker account number and login information in order for it to download your data. As always, you can also enter your transactions manually.
In addition to stocks, bonds, mutual funds and exchange-traded funds, the program can also handle real estate investments, options and user-defined securities. Furthermore, you can track buys, sells, dividends, short sales, margin transactions, stock splits, reinvestments, interest, commissions, and bond premiums and discounts.
After you create your portfolios (you can populate a portfolio with unlimited holdings), they will be listed on the left-hand side of the page. Clicking on a single portfolio will load all of its relevant data. The current value, unrealized gain and loss, estimated income and last update date are presented at the top-left of the screen, and the year-to-date activity for the portfolio is provided underneath. There are also five separate tabs for data on the portfolio selected. The Portfolio Values tab shows your holdings along with the quantity owned, unit and total cost, market value, and gains and losses. The Income Received tab provides a breakdown of your income-generating investments along with their tax consequences. A listing of the securities sold during the current year is also provided. The Holdings Summary and Allocation Summary tabs provide useful information on your portfolio as a whole, presenting a breakdown of portfolio asset allocation and transaction history. In addition, holdings are all shown as a percent of your total portfolio.
Portfolio values are not automatically updated. To update portfolio values, click on the Update Prices button at the top of the program, which updates figures using Yahoo! Finance.
Numerous reports are also provided by Investment Account Manager. Certain reports are ubiquitous among the top programs, and others are unique and worth noting. Investment Account Manager provides an upside-downside report that can also be charted. The upside-downside ratio is one of BetterInvesting’s classic measures of risk. It measures the ratio of a stock’s upside if things go “right” to its downside if things go “wrong.” In essence, it measures risk against reward, providing an assessment of the risk/reward trade-off for investments in your portfolio. The program also provides a fund diversification characteristics report that shows a comprehensive dissection of each fund a user owns. The report provides asset class composition, stock composition, and sector and company size analyses. A bond maturity schedule is also provided, just as with Quicken Premier. For each report, you can specify the portfolio(s) and date range. For the performance reports, users can calculate value-weighted or time-weighted returns and view performance by asset class, sector and industry. The reports can also be saved in PDF format.
The help section of Investment Account Manager was very useful, covering most areas of the program.
Fund Manager 11
There are three versions of Fund Manager—personal, professional and advisor. The personal version suits the needs of most individual investors, while investors who trade frequently may opt to go with professional. For the most part, the advisor version is for professional investors, such as financial advisors and broker/dealers and is priced accordingly.
The personal version of the program targets individual investors and provides all the features that assist users in managing a personal portfolio, such as retrieving values using the Internet, providing a number of graphs and reports, and listing bond and income schedules. The professional version, targeted for traders, includes technical analysis tools, risk/reward scatter plots and real-time quotes. The advisor version includes a variety of client management features. There are also significant price differences associated with each version. The personal version costs $69, while the professional version is $295 and the advisor version is $1,295. The professional version was tested for this review, and it is the version covered in the remainder of this section.
Fund Manager, like Investment Account Manager, is a pure investment management software program, with no personal finance capabilities. This program is not as intuitive as Investment Account Manager or Quicken Premier, but it offers some great reports and performance tools.
There are a few ways to create a portfolio. Using the New Portfolio Wizard, which can be found in the File drop-down menu, is the easiest method. You have the option of downloading the positions and transactions directly from your brokerage firm by providing your account number and login information. In our test, we were able to download all transactions going back to when the brokerage account was created, one year ago. If you are uncomfortable with this, you may also export your transactions from your brokerage account to a compatible file and then import the transactions into the program. This method does not require users to provide login information and is more convenient than manually inputting all the data (though you can do so if you choose).
Asset types are automatically assigned for important positions and transactions. Users can also manually change the asset type. There are 25 separate asset type choices provided by the program, and users can also specify their own. Make sure that each holding is labeled correctly before using the asset allocation reports.
After importing or manually creating your portfolio, you can choose from a wide variety of graphs to display in the program. Highlight the portfolio you wish to display on the left-hand side of the program before selecting the graph. There are several graphs worth noting. Risk/reward scatter plots can be graphed for each investment, asset type, investment goal, symbol or portfolio. These scatter plots graph the time-weighted return against the standard deviation of monthly returns, enabling users to quickly identify items that are under-performing based on the volatility of the investment. A customizable technical analysis graph is also provided. The graph is divided into a top and a bottom section, and the user defines which technical indicator is displayed in each section. Indicators offered by Fund Manager include moving averages, Bollinger bands, MACD (moving average convergence-divergence) and relative strength index, among others.
Fund Manager offers several reports that are useful to individual investors. Time-weighted returns can be calculated for specified time ranges as well as for individual securities and asset allocations. The distribution summary displays distributions paid for a time period and includes dividends, short- and long-term capital gains and foreign tax distributions. The program also provides a rebalance report that outlines the differences between your asset allocation and a target asset allocation. Bond maturity schedules are also provided.
Since our last portfolio management software article, Fund Manager has undergone two major updates. Notably, the program now works with Windows 7. Also, the risk/reward scatter plots and monthly performance reports are new additions. A complete list of updates can be found at the Fund Manager website.
|Performance||Documentation||Ease of Use||Price||Pros||Cons|
Quicken Premier 2011
$89.99 for Windows,
$69.99 for Mac -2007
+ more budget & net
worth tools & reports
+ Mac version
+ tax-adj. returns & reports
|–no free demo|
Investment Account Manager
($119 AAII members)
+ unlimited portfolios,
securities & transactions
+ easy to use
+ in-depth report tools
|–no tax-adjusted returns|
Fund Manager 11
+ customization of
+ great reporting tools
|–broker download may not|
|–no tax-adjusted returns|
|–no view of all transactions|
Overall, each of the three programs reviewed here provides users with excellent tools for tracking their investments. Two of the programs offer trial accounts, and we suggest making use of them. Hands-on experience is the only way to get a feel for a program’s ease of use, as well as the types of reports that it can generate.
While Fund Manager and Investment Account Manager are true portfolio management software programs, Quicken Premier provides additional personal finance capabilities. This added dimension makes Quicken Premier worth considering. Unfortunately, Quicken Premier is the only program out of the three reviewed that does not offer a trial account.