Top Portfolio Management Software
Discover the benefits and process of managing your portfolio. Learn how portfolio management software helps you improve your financial assets.
In investment terms, your portfolio is your collection of financial assets. In some cases, your portfolio is a single account, while other portfolios are more diverse. Some common examples of items in a portfolio include mutual funds, stocks or bonds, real estate and even objects like art or collectibles. In recent years, portfolios also include digital investments, such as cryptocurrency. Portfolio management is an investment strategy where you either let a professional or automated service run your portfolio to increase your assets.
While there are many methods to manage your portfolios, they fall under two categories, active and passive. With active management, a portfolio manager takes a direct approach with your investment, with the overall goal to outperform whatever benchmark you set. This is much more expensive than passive management, which is run by a digital advisor using an investment algorithm. Whether you want active or passive investment, there are many portfolio management programs available.
Benefits of Portfolio Management
One of the primary benefits of portfolio management is organization. With portfolio management, you look at your current finances and set goals for the future. Both strategies involve working with financial experts, so you end up with a better understanding of what your current assets are worth and how the value is likely to increase or decrease over the following years. It also gives you an opportunity to safely explore potential ways to branch out your finances.
A common mistake investors make is becoming too comfortable with their investments. Portfolio management ensures you remain active in your financial future, allowing your assets to grow in value instead of becoming stagnant. It also helps you think about your future and decide where you want to be financially over the next couple of years.
You also gain a better understanding of your assets with portfolio management. Investors commonly focus on what something is worth without understanding why it has value. By understanding what makes your investments valuable, you have a better chance to predict whether the investment will improve in the future. It also gives you an idea of what else you can invest in. For example, if your most valuable assets are real estate, you could cash out your remaining assets over the next several years to invest in new real estate.
Portfolio Management Process
Some investors make the mistake of trying to manage their own investments without assistance. Even if you do not want to hire an active manager, it is still important to understand what goes into portfolio management. The software is a good way to automate the process, but if you go in blind, you risk making a mistake and harming your assets.
A key consideration with portfolio management is looking at where your investments live. For example, switching out of an IRA to a different retirement account may end up saving you money because of tax advantages. Portfolio management software allows you to run different simulations, separating your assets into different categories to see the impact on growth rate or how much you pay in taxes.
Another important aspect of portfolio management is rebalancing. With rebalancing, you diversify your finances so all your investments are not in a single source. That way, if your industry experiences a sudden loss, you are not devastated.
Once you manage your existing finances, the next step is to look for the future and decide what areas you want to invest in. This process is known as your risk tolerance. With investing, the more you are willing to invest, the greater the potential returns. However, if your investment fails, you end up losing more. How comfortable you are risking your finances depends on many factors, including your current portfolio, where you want to be in the future and your personal preferences. For example, if you are planning a major life change, such as moving or starting a family, your risk tolerance is likely to be lower.
If you are worried about the costs associated with portfolio management software, consider getting started with Personal Capital. As of writing, Personal Capital is free to use. It is one of the more basic platforms, with a greater emphasis on planning for your retirement. It still has plenty of options to keep track of your existing portfolio, including options to diversify your assets or find new financial accounts to gain additional tax benefits.
It also includes a host of budgeting tools, to track your existing spending and help you create a plan to expand your investments. Personal Capital also has family planning options as well, including options to set aside for college funds for your children.
Quicken Premier 2022
Quicken Premier is one of the longest running portfolio management software options. With Quicken Premier, you can sync all of your financial accounts, giving you an easy overview of your assets. This not only includes investments, but also your current bank accounts. You can create virtual accounts to simulate projected growth based on changing your financial accounts. This is especially helpful when you are trying to visualize how much you will spend each year on taxes, or paying fees to withdraw your investments early in case of an emergency.
You can also customize stock watch lists to keep an eye for future investments, as well as set reminders on your accounts. All your data can also be downloaded and converted into an Excel document. As of writing, Quicken Premier costs $77 for a yearly subscription.
Morningstar Portfolio Manager
Morningstar is an advanced portfolio manager, with a wide range of options for both active and passive management. Through Morningstar, you can directly manage your assets and track the value of your stocks and bonds. With a premium account, you gain access to portfolio analysis, which goes into greater detail on why your investments have either increased or decreased in value, as well as future projections.
Morningstar provides a free account, but it only has access to basic financial tracking. A premium account is $29.95 each month, or $199 for an entire year. You can download a 14-day free trial of the premium account before committing to a membership.