Today there are several Financial Software packages which carry a variety of options.
The first step is often to do an analysis of your current portfolio compared to your proposed portfolio with comparison charts showing trailing period returns, growth of investment, asset allocation, and risk return analysis.
The next step allows you to organize your documents including Bank Statements, Retirement Accounts, Wills and Trusts, Brokerage Statements, Pensions, and Insurance Policies.
Software can also accept and chart your monthly expenses and your saving rate.
It can even track your frequent flier miles.
Software can be helpful in preparing taxes and applying for loans and estate planning.
Asset Allocation pie charts provide an easy to understand visual if the portfolio is “allocated to suit your needs.
Risk Return Analysis can identify the Sharp Ratio, Alpha, and Beta of the portfolio.
The Sharpe ratio uses standard deviation to measure an investment’s risk-adjusted returns. The higher an investment’s Sharpe ratio, the better an investment fund’s returns have been relative to the risk it has taken on. It was developed by Nobel Laureate William Sharpe.
Using these graphs it can be determined and visualized if you have more risk than is the average for the expected return, the graph is called the Efficient Frontier.
The Efficient Frontier is a set of optimal portfolios that offers the highest expected return for a defined level of risk or the lowest risk for a given level of expected return. Portfolios that lie below the efficient frontier are sub-optimal, because they are not expected to enough return for the level of risk.
Investing in securities is subject to risk and may involve loss of principal. No strategy assures success or guarantees against loss.
This article is for informational purposes only and is not a complete summary of information needed to recommend any investment. Consult the appropriate professional to determine how this information applies to your unique situation.
About the Author: Charles Marsala is a LPL Financial Advisor with Benchmark Investment Group with Securities offered through LPL Financial, a member FINRA/SIPC. He can be contacted at Charles.Marsala@lpl.com