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OPINION

Do you know how good you are at investing?

Do you know how good you are at investing?
February 3, 2022
Do you know how good you are at investing?

Is anyone else bothered by unsatisfactory portfolio performance analytics on most of the major platforms? If you hold a basket of funds and/or stocks, it can be quite hard work finding out if you might have just been better off in a tracker fund. 

I took to Twitter late last week to see what other people’s thoughts are on the matter. Forced to comply with its 25 character-per-option polling rules, I asked if and how private investors monitor their overall performance compared with a benchmark. The most popular response was “Manually in Excel” with 37 per cent of 177 votes. 

28 per cent ticked “I don’t really monitor”. While part of me admires this, as incessant checking is unlikely to help either performance or your mental wellbeing, it supports a theory I have suspected – lots of people don’t have a grip on how their investments are performing. 

Of course, it may not be appropriate to simply compare your portfolio to a tracker fund. If you are risk-averse, you wouldn’t expect to keep pace with a world equity index tracker. Popular private investor and podcaster Peter Higgins (@conkers3), for example, says he targets a 10 per cent a year return (3 per cent in dividends and 7 per cent capital returns) irrespective of how the market is performing as that better suits his goals. But comparing the equity portion of your portfolio with its most relevant benchmark should help you review your investing skills.  

Fortunately for Investors’ Chronicle subscribers, you can log your portfolio in the “Tools & Data” section of our website which makes tracking it easier, and you can also follow some of the IC’s predefined stock screens. But the one thing it doesn’t do (yet!) is show your “time-weighted” performance, which removes the effect of cash flows in and out of your account.

For the uninitiated, you can do this fairly easily by “unitising” your portfolio in Excel. If you use the IC portfolio tool, you can click a button and export the data. It’s a bit fiddly to set up but there are plenty of online guides that teach you how to do it, which is essentially what fund managers do to account for money that flows in and out of their open-ended funds.

Or you can pay for a professional service – such as SharePad – which 12 per cent of the respondents to my Twitter poll said they do. The remaining 23 per cent said their platform shows this, but I’ve had a look at several of the large platforms and very few of them enable you to review easily how the timing of your buying and selling is impacting your performance. In the share performance section of the Hargreaves Lansdown website, for example, clients can view the historical performance of their holdings, toggle between share price and total return and add in other investments as a comparison as they wish.

AJ Bell used Morningstar’s portfolio X-ray tool, which enables you to see returns over various time frames of your portfolio compared with a benchmark. The benchmark, however, is automatically selected by Morningstar to correspond most closely with what you own – you can’t play around with it. It’s also just a snapshot of your portfolio at a point in time and does not take into account inflows and outflows. 

One of the few platforms that does show time-weighted performance is Freetrade. While it has few investment options and far less extensive research and analytics tools than the traditional platforms, hopefully the others might follow suit. 

If anyone would like to share their thoughts on this, please email me at mary.mcdougall@ft.com or message on Twitter @marymcdougall13.