A quick reminder that my firm is currently offering a FREE retirement & tax return analysis.
Just like a neurologist wouldn’t perform foot surgery, we remain highly specialized in retirement and tax planning for people age 50+ who have accumulated investments of $1 million or more.
That’s where we do our very best work!
If you’re on the hunt for an expert who is dedicated to helping you lower your tax bill in retirement, click here to learn more about our Free Retirement Assessment™ process.
Stock Market Update + 3 Portfolio Analysis Tech Tools
Today on the podcast, I’m sharing 3 of my favorite portfolio analytics tools, one of which is completely free.
I’m also using these tools to provide an update on some of the crazy things happening in the stock market right now.
So if you’re ready to continue learning how you can use technology to better understand what you’re investing in, today’s episode is for you.
Want to learn how to lower your tax bill and improve your investments?
How to Listen to Today’s Episode
Episode Links & Resources:
- 👉 Get Your One-Time Retirement Plan
- Top Performers from 2020
- Portfolio Analytics Tools Mentioned:
- Three YCharts
- Kit Juckes Market Commentary
Stock Market Update + 3 Portfolio Analysis Tech Tools
Taylor Schulte: Hey everyone. A quick note before we start the show that my firm is currently offering a free retirement and tax return analysis. Just like a neurologist wouldn't perform foot surgery, we remain highly specialized in retirement and tax planning for people over age 50 who have accumulated investments of $1 million or more. That’s where we do our very best work.
So if that's you, and if you're on the hunt for an expert who's dedicated to helping you lower your tax bill in retirement and you wanna learn more about our free assessment, just head over to freeretirementassessment.com. That's www.freeretirementassessment.com.
Okay, onto the show.
Welcome to the Stay Wealthy podcast. I'm your host, Taylor Schulte, and today I'm continuing with our technology theme for the month, and I'm sharing three of my favorite portfolio analytics tools, one of which is completely free. I'm also using one of these tech tools to provide an update on some of the crazy weird things that are happening in the stock market right now.
So if you're ready to continue learning about how you can use technology to better understand what you are investing in, today's episode is for you.
For the links and resources mentioned, head over to youstaywealthy.com/101.
In 2020, many investors were feeling pretty good about their unique ability to outperform boring broad base indexes like the S&P 500. Just pick any of your favorite momentum growth-oriented stocks like Tesla, Peloton, Spotify, Zoom, which we've all become really familiar with, or even Moderna, and you looked like a hero.
Many of these stocks were up 30, 50, even 80 plus percent last year, and a few of them, like Tesla and Moderna were up triple-digit percentages with Tesla leading the charge in the NASDAQ with a 743% return in 2020. And all of this is happening while the S&P 500 returns a boring unexciting 18% return in 2021.
Things are looking a little bit different. Individual stock pickers are quickly learning that risky growth and momentum stocks don't always go up. And this leads me to the first tech tool that I wanted to share with you today.
And that tool is Y charts. Y charts is an extremely powerful investment research platform that takes millions of data points from the global financial markets, and it allows non-PhDs like you and me to analyze securities and funds and ETFs and different investments and even build sound portfolios.
And while it was built for wealth management firms like mine, it's also accessible to consumers, but it's not a cheap piece of software. Don't worry though, but I'll be sharing two other tech tools with you today. If you enjoy nerding out on some of this stuff and you don't want to pay thousands of dollars per year for something in addition to analyzing client portfolios and model portfolios that you or a wealth management firm might be building.
What I really love using Y charts for is to get a quick overview of how different asset classes are performing over different time periods. It's what I use to share a lot of the performance data that I've shared on this show in the past.
So with that, let me share some data with you that I pulled together from Y charts to expand on my initial comment about risky growth. Stock investors have seen a bit of a trend change this year.
So in general, the financial markets started off on a good foot in 2021, and then we started to see a bit of a shakeup in mid-February. From February 12th to March 8th, we saw the NASDAQ 100, which is a tech-heavy index that's made up of a hundred non-financial companies. We saw the NASDAQ 100 dropped by 10.5% during this short little time period between February 12th and March 8th. Momentum stocks as measured by the iShares MSCI, momentum factor ETF, they dropped over 15% during this same time period.
Now, while the floor was falling out from underneath these indexes, the boring old S&P 500 was only down about 2.5% percent. So there's a giant disconnect that was starting to happen between these different indexes and then get this US small-cap value stocks, which you've heard me talk a lot about on this podcast recently, were actually in positive territory during this recent drawdown, and they returned just over 2% as measured by the MSCI small cap value index.
So to recap, this tech and momentum stocks were down double-digit percentages during this drawdown. In February, the S&P 500 was down a couple percentage points, and then the hated unloved small-cap value stocks were in positive territory. Now, these are just indexes that we're talking about and these indexes are made up of hundreds or even thousands of different stocks.
But I started the show talking about individual stocks and how investors were feeling pretty good about their stock picking abilities in 2020. So let's just take a look at what some of those stocks did during this bear market that we saw in February.
So in February, again, same timeframe February 12th to March 8th, Peloton down 34%. Moderna down 32%, Tesla down 31%, and Spotify down 23%. Now to be fair, these losses likely aren't all that painful for longer-term investors who have been investing in these stocks for a long time and saw 400% returns on their Zoom stock last year or even doubled their money investing in Spotify.
And some of these stocks like Moderna have had a healthy year-to-date return in 2021, even with this drawdown. However, knowing when to buy and sell individual stocks and knowing what stocks to buy is an incredibly challenging game to play.
Many of these stocks were just absolutely crushed during the covid crash of 2020, and they had massive gains during their recovery and through the end of last year. And then now we're seeing these well-performing stocks experience big losses.
As Ben Carlson mentions in a recent blog post,
It's almost impossible to avoid anchoring one way or another. You could look at returns from the late March, 2020 lows and assume you've already missed the boat, or you could look at the recent highs and assume that the 20% to 40% drawdown offers a buying opportunity. This is why investing in an individual stocks can play such head games with you. Anchoring to the bottom makes it hard to buy more of a good stock and anchoring to the top makes you think that you've found a bargain. Both instances can be right or wrong depending on the stock market environment.
Portfolio management is so much harder when picking individual stocks, especially in a concentrated manner. Wonderful gains can turn into terrifying losses in an instant, leaving you with more questions than answers.
As I've shared many times on the show, risk and reward go hand in hand in investing in individual stocks can result in massive gains, but those potential gains come with massive amounts of risk and not just financial risk. But as Ben explains, also psychological risk.
So for those that have their eyes on retirement or if you're already retired, I'm not so sure that those are risks you want to accept. For those that are decades away from retirement, you certainly have time on your side and maybe the ability to take some more risk, but it's still important to determine how much risk you are willing to take.
You've heard me before say this, but I'm a big fan of carving out no more than 5% of your investments and taking my big risks there, like knowing that if everything goes down to zero in that account, my financial plan likely won't be jeopardized to round out this whole conversation on the current state of the markets Kit Juckes at SocGen, I think just kind of summarize the current state nicely saying the pattern seems clear enough.
The equity market is seen a sector rotation, but not a correction. The bond market is seeking a new equilibrium in the light of a vastly improved economic outlook in both the US and elsewhere. And for what it's worth here's a quick summary of where major indexes stand year to date.
As of March 11th, small-cap value index up 14% S&P 500 up 5% Nasdaq up about 4% and US treasury bonds down 4%. Believe it or not, it's been about a year now where small-cap value stocks as measured by that MSCI small cap value index. It's been about a year where small-cap value stocks have outperformed the S&P 500 in the last six months alone, small value stocks have more than doubled the returns of the S&P 500. Now, will the trend continue that that's anyone's guess?
I don't pretend to have a crystal ball here, but 2021 is certainly proving to be a different animal than 2020 with tech stocks having their troubles and the bond markets starting to see yields settle at these new levels.
Okay, as mentioned, all of that data I just shared was pulled from Y charts, one of my go-tos for nerdy financial market information. I'll link to some of those charts I referenced in the show notes as well as more information on Y charts, which can be accessed by going to youstaywealthy.com/101.
The next tool I wanna share with you is called Portfolio Visualizer. And what's great about this tool is that they have a free version that doesn't even require you to have a registration or a login to the website. Now, it doesn't have all the bells and whistles that Y charts has. It doesn't have all the bells and whistles that the paid version has, but it's likely enough for the casual user who just wants to have a little fun on a Saturday morning and, you know, just poke around and take a look at a few things.
The first thing I wanna mention when it comes to any portfolio analytics tool, including portfolio visuali, visualizer is many of them are built on providing back tested data. In other words, you can plug in your investments or investments that you're considering and you can see how they've performed in history.
And while it, it's certainly helpful to see, you know, what's happened historically, it can also be really, really dangerous because, well, you, you've heard the, the disclosure before past performance is no guarantee of future results, but also it's easy to get caught up obsessing over short time periods, which we all know is, is really dangerous.
Even 10 years is a short time period. And you know, one could even argue that a hundred years of data isn't enough to make matters even more complex. Vanguard did a study that concluded that the best performing mutual funds over the last five to 10 years were the very ones that went on to underperform over the next five to 10 years.
As you can imagine there are a lot of things that take into consideration when you're analyzing a portfolio or even individual securities and just looking at historical performance, it's just one data point. And that data point is pretty easy to manipulate in order to create a particular narrative. It's also pretty easy just to misunderstand.
So just please be careful when you're using these tools and attempting to make investments or even make changes to your investments based on any of the results that you come across. The stuff that can be fun, but it can also be really damaging and it can be distracting to the things that really move the needle in your financial life. All that being said in addition to having a little fun seeing how different models and portfolios have done in the past, I love the fund screener and asset correlation tools that are provided for free by portfolio visualizer.
As for the fund screener, this is a really simple way to type in your mutual fund or et t ticker and get relevant, helpful information quickly. For example, if I type in the ticker VWELX, which is the ticker for the Vanguard Wellington Fund, I can quickly see historical returns, but I can also see its expense ratio, which is 25 basis points.
It's volatility, which is measured by the annualized standard deviation of monthly returns over the past three years. And I can also see the Sharp and Sortino ratios, which are popular metrics used to measure performance after adjusting for its risk. We call this risk-adjusted returns. The asset correlation tool is also helpful for figuring out how correlated your investments are to each other. We certainly don't want all of our investments moving in the same direction, that would be the opposite of diversification.
Now, unfortunately, you can't enter tickle ticker symbols here but Portfolio Visualizer has handpicked 15 ETFs that represent the major asset classes, and it gives you a nice correlation chart. unfortunately, again, the data only goes back to 2008 for the free version, but it can still be a helpful introduction into learning about correlation.
For example, as I've shared on the podcast before, US stocks and US government bonds are often negatively correlated. we even see that in a short time period, like 2021, which I just shared, where S&P 500 is positive and US government bonds are negative. But this is especially true during catastrophic time periods, and that's when we really want those government bonds in our portfolio.
If you look at the portfolio visualizers correlation chart, even though it only goes back to two and eight, we see that this relationship is highlighted where the S&P 500 ETF has a correlation of negative 0.32 to the long-term US government bond ETF.
Again, there's 15 different asset classes there on that page, and there's a nice correlation chart that shows you the monthly or even annual correlation between those asset classes there. these are just two of the dozens of free tools available on the portfolio Visualizer site.
If you wanna play around, I'll link to everything in the show notes, which can be found again at youstaywealthy.com/101.
The third portfolio analysis tech tool I wanted to share is called Quantity Analytics. And similar to Y charts, this tool is also intended for financial advisor use. And I don't see a disclaimer on their site referencing that it's only for professional use, but I'll make the disclaimer here just to be safe. And that is to to check its availability for retail use before you register and to use at your own risk.
As always, this show is for informational purposes only and you assume full responsibility res with respect to your investment decisions. With that said, quantity is similar to portfolio visualizer, although it's a little more expensive at I think just over a hundred dollars per month, but it offers very similar capabilities and I'd argue that it's just much more visually appealing.
One of the things that I've always appreciated about quantity, although I don't use it anymore today but what I appreciated is that it allows you to backfill positions that you're analyzing.
For example, some mutual funds and especially ETFs have short track records. They, some of them were just created in the two thousands. And if you're analyzing a basic S&P 500 ETF, let's say as part of your global portfolio and that ETF was born in let's say 2005, you might wanna see data that goes back even further than 2005, maybe even as far back as 1928.
In that case, you can tell the software to use Index Data from the s and p 500 to backfill the performance of that particular fund or ETF that you're using so that you can get a longer-term picture of the portfolio that you're analyzing.
I'm gonna stop there with QTI because it's likely more than anyone listening to this podcast really needs, but I wanted to share a third option with everybody that sat in between thousands of dollars per year and free. And there are of course, other analytics tools out there.
Morningstar is another great platform that has a free anti-paid version and many of the major custodians like Schwab and Fidelity offer free tools as well. Next week on the show, I'm gonna pivot slightly, but still stick with our technology theme and I'm gonna be talking about NFTs or non fungible tokens, and I promise I'm not losing my mind over here.
I will return back to Planet Earth where we'll talk about important financial planning topics like long-term care, which thanks for the great suggestion, Michael H how to create withdrawal strategies and Retirement hat tip to Gary, one of our listeners for this great suggestion and the optimum split between Roth accounts and traditional accounts, which I have to thank Tom for sending in that great question.
That being said, the world is changing quickly and I think it's important to get outside of our comfort zone and try and understand some of the emerging technology that's being developed and how it's being used to create new investible asset classes.
I laughed at NFTs when I first started reading about them, but I started to dive deeper recently. And while I won't predict the future and where NFTs go from here I've put together a really simple breakdown for our listeners who just want to better understand this stuff in plain English, and maybe it's just for entertainment purposes and you just wanna have some fun and learn about NFTs.
It certainly is a really interesting space. So I'll be sharing more about that in next week's episode. And then again, I promise I'll return back to Planet Earth. We'll get back to some of the great financial planning topics that this show is known for.
For all the links and resources mentioned today, head over to youstaywealthy.com/101.
Thank you as always for listening. Have a great rest of your week and I will see you back here next Tuesday.
Episode Disclaimer: This podcast is for informational and entertainment purposes only and should not be relied upon as a basis for investment decisions. This podcast is not engaged in rendering legal, financial, or other professional services.