RSP
I am always asking A+ Investor subscribers to send me feedback and suggestions for service enhancements and Making the Grade content ideas. Recently, Dan B. sent me an email asking for some guidance on how he can use A+ Investor to evaluate his current stock, mutual fund and exchange-traded fund (ETF) holdings. So I address his question this week with some tips that can help all subscribers get more out of the A+ Investor tools.
You may—like other investors—own stocks, mutual funds and/or ETFs. After buying these securities, how do you evaluate their attractiveness? Are stocks you hold still attractively valued? Are they still the growth-type stocks they were when you bought them? What about your mutual funds and ETFs? Are they still good investments or should you start looking at their competitors?
Doing the analysis to figure out the answers may seem daunting at first. Fortunately, it doesn’t have to be. A+ Investor subscribers have access to exclusive AAII My Portfolio analysis tools that give you the information to make the important decisions about your portfolio. For information on how to set up a portfolio in the My Portfolio tool, click here.
At a glance, you can see in My Portfolio whether your investments are still worth holding onto, whether you are taking on too much or too little risk and how diversified your portfolio truly is. Best of all, the data is customized for you and focused on the investments you are most interested in.
At the top of the My Portfolio table, there are several tabs: Portfolio, News, Grades, Diversification Analyzer and Insights. Each provides specific information about your portfolio.
The Portfolio tab is the one that opens when you click on one of your portfolios; it provides an overview of your holdings. You’ll find price, gain/loss, valuation and dividend data about your holdings. You can also add any personal notes, such as the reason you purchased a certain stock.
You can quickly judge the attractiveness of your investments with the Grades tab. Stocks, mutual funds and ETFs are assigned a grade of A, B, C, D or F. Just like in school, all else equal, A’s and B’s are good while D’s and F’s are bad.
When evaluating your stock holdings, you can see whether a certain stock still warrants a spot in your portfolio based on the characteristics that matter to you most, such as attractive valuations, strong growth or price momentum, positive earnings estimate revisions and surprises, or high quality.
So, in the example above, if you are a value-oriented investor, seeing Domino’s Pizza and Tesla with Value Grades of D and F, respectively, may lead you to consider removing them from your portfolio and look for more attractively valued stocks. However, if you are more of a growth or momentum investor, then Tesla may very well fit your investing mold, with a Growth Grade of B and a Momentum Grade of A.
Want to learn more about what’s driving the stock grades? Just click on the stock ticker symbol. Doing so will take you to the Stock Evaluator, where you can then click on the Grades tab to get more detail for that particular stock.
There are also grades for mutual funds and ETFs related to performance, expenses and risk. The grades provided for funds and ETFs indicate how a particular fund stacks up against other funds in the same category.
So, for example, the grades you see here for the Invesco S&P 500 Equal Weight ETF (RSP) illustrate how that ETF compares to others in the same Morningstar category (large blend). Compared to other ETFs in the same category, the Invesco S&P 500 Equal Weight ETF has ranked at or near the bottom in terms of performance over the last one-, three- and five-year periods, and ranks at the bottom in terms of relative risk.
The Diversification Analyzer in My Portfolio gives you a breakdown of how your portfolio is allocated based on the number of shares you’ve entered for each stock, mutual fund and ETF, plus any dollar amounts you’ve entered for cash and/or bond holdings. This information is used to tell you if you are being too aggressive or not aggressive enough given your chosen investing profile.
Once you have entered the number of shares you own, the Diversification Analyzer in the My Portfolio tool gives you a breakdown of how your portfolio is allocated.
In the example below, the investor considers themselves as being aggressive. Based on AAII’s asset allocation models, while the portfolio has an aggressive overall allocation to stocks, it may not have a high enough allocation to foreign stocks (or bonds).
If this investor truly views themselves as someone who wishes to maximize long-term growth and has the ability to look past shorter-term market volatility, they could use this information as a sign to consider increasing their exposure to foreign stocks, while lowering their allocation to domestic stocks.
Diversification is not just limited to stocks, bonds and cash. Diversifying within asset classes can help protect you against security-specific risks. Even when you hold many different investments, you may not be as diversified as you think. This can particularly occur when you hold too many stocks from one sector or just a few sectors. You can also diversify, and even boost your returns, by purposely allocating beyond large-cap stocks.
The Diversification Analyzer gives you a breakdown of your portfolio by sector, size and geography. The Sector Diversification considers your stock, mutual fund and ETF holdings in the portfolio. However, the size and geographic analysis only covers the individual stock holdings in your portfolio.
So, in the example below, the investor is heavily allocated to consumer cyclical and health care stocks. Meanwhile, they have very little exposure to sectors such as energy and utilities.
If your goal is to have a truly diversified portfolio, you may wish to consider paring down your holdings in any concentrated sectors and reallocating funds to any underweighted sectors.
As you can see, we designed My Portfolio to be more than just a tool for monitoring the price changes of your investments. We included features designed to help you make better decisions. My Portfolio’s analytical tools can help you identify whether you are taking on too little or too much risk as well as whether you have too much or too little exposure to certain types of investments. You can use this information to determine whether you need to adjust your allocations or if you are on the right path.
