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Beware: All watch lists and portfolio management tools are not created equal

by Doug Morris, CEO, Sharesight

Finding the right investments is just one step towards becoming a successful, disciplined, and vigilant investor. Keeping a watchful eye on your portfolio’s true performance and tax positioning is just as important. After all, execution strategies and rules-based investing have produced some of the worlds most admired, and steady investors.

Trusted and high quality websites where we source quotes, news, research, investment strategies, and ideas are not hooked into our portfolios. They might offer complimentary “watch lists” or “portfolio tools,” but these may not give you an accurate, personalised return. This is critical for investors to understand. These websites might be great at telling everyone what to do hypothetically at the same time, but they don’t have a view into our actual holdings or personal financial situations, and this matters tremendously to your bottom line.

Typically, a watch list assumes a starting balance of $10k. In cash. No holdings, no trade history. Not a likely scenario for anyone. From here, it asks you what shares to add, what prices to begin with, and it will calculate “performance” from there based on the share’s daily closing price. It will simply sum the numbers to provide a “total return.” Do not trust this return. If you invested exactly as you setup your watch list, you would not match this return. (Ever wondered why a fund manager touts excellent returns in a growth of $10k chart that investors can’t seem to match? There’s a reason for this, but that’s another blog topic…)

Even though these tools might ask you to enter a purchase price, quantity, or date, there are key details they’re not privy to, which are required to produce a correct return. For instance, how about dividends and the implications of franking credits? What about about brokerage fees? If it’s an international share, what is the impact of currency movements? What about the shares you have sold vs the ones that you still own? All of these elements need to be factored in to create a proper annualised return.

Taking this a step further, anytime you make a trade in the future, these systems need to be manually updated, which is a major time waster. Sharesight will not only calculate an annualised percentage return on the fly, but we’ll also automatically factor in all of your trades going forward with our contract note syncing service

Even the institutions where we place our funds and do our trading don’t offer everything you need, especially when it comes to EOFY performance and tax reporting. And if you’re like me and maintain more than one trading account (and have multiple super accounts), it’s impossible for these systems to talk to one another. Keep in mind, these are banks, focused primarily on well, being banks.

The main reason research houses and banks don’t offer what Sharesight does is that it’s very difficult to build, expensive to produce, and sits outside of their areas of focus. We’ve stuck to our knitting since 2007, whilst perfecting our methodology ever since. Portfolios and their returns are very personal things, otherwise these tools would be a commodity.

So be careful not to get fooled by watch lists and tools masquerading as proper portfolio management systems and use Sharesight. Organise your portfolio histories, sync your future trades, and get all your investments speaking the same language..

Find out why even accountants are using Sharesight on behalf of their own portfolios.