Portfolio management software

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Portfolio management software programs are tools used by investors, portfolio managers, individuals, fund managers, and professional money managers for tracking and managing multiple portfolios including multiple IRAs, 401(k) accounts, investment portfolio accounts, brokerage trading accounts, stocks, bonds, fixed assets, derivatives, high yielding savings accounts, international assets, structured instruments, etc.

Most Portfolio Management tools now run on Web browsers. Over the years, Web-based portfolio trackers have become very popular, and there are now significantly more Web-based programs than desktop based portfolio tracking software programs. Web-based portfolio trackers offer real-time price updates (usually for a fee) and up-to-the-minute news articles on holdings in a portfolio. The best online portfolio managers can sync directly with the investment accounts, meaning the user does not need to enter updates manually. However, while Web-based portfolio trackers are capable tools, desktop based portfolio managers still represent a significant upgrade in a majority of areas of functionality. [1]

Portfolio management software is disrupting the investment management and wealth management industry by automating the work that portfolio managers used to perform. One prime example of this is Charles Schwab's Robo-Advisor, or Betterment.

Typical features of a Portfolio Management Software

Investment Records Management

Investment Records Management feature typically helps users track stocks, mutual funds, options, bonds, cash, and a wide variety of other investment types. It also helps keeping track of purchases, redemptions, distributions, transfers, as well as advanced transactions, such as splits, re-combinations, mergers, and spin-offs. The feature should allow transactions to be retrieved directly from a broker or mutual fund company, imported from a wide variety of formats, or entered manually.

Portfolio Rebalancing

Primarily refers to the process of restoring your portfolio to your target allocation. As the market fluctuates, and some positions do better than others, the weightings of different assets in your portfolio will shift. "Winning" positions will constitute a larger portion of one's portfolio than "losing" positions. This may seem like a good thing, but winning streaks don't last forever, and can reverse. Therefore, investors will cash out certain portions of their winning positions, and invest the proceeds in different positions. This maintains diversification in the portfolio. Furthermore, as investors age, they will want to rebalance their portfolios from growth assets to safer, income generating assets. Finally, portfolio rebalancing refers to a feature that creates multi-currency and tax-efficient trades. Helps rebalance to asset classes, model-of-models, and SMA or UMA strategies, across accounts or with multiple models in one portfolio.

Sector Market Rotation

Different sectors perform well at different points in the business cycle. As the economy goes through different phases of the business cycle, investors "rotate" their investments from sector to sector. There are five phases in the business cycle, all corresponding to different phases of economic activity. For example, during the initial expansion phase of a business cycle, technology stocks perform well, as companies expand investment. Transportation also performs well as their is a need for greater capacity to transport goods and services in order to meet consumer demand. In contrast, during the final phase of the business cycle, Consumer Cyclical stocks and Financials perform well as investors shift to a more defensive stance.


Hierarchical Portfolios

Allows managing hierarchical sub-portfolios. Sub-portfolios are useful for organizing investments into specific accounts, or for investment advisors tracking investments for multiple clients.

Automated Price Updates

Retrieve daily and historical prices from the stock exchanges and online sites.

Capital Gains Reporting

Should allow reporting of First In First Out (FIFO), Average, or Specific Lot accounting methods. Capital Gain reports should provide all the information required for tax reporting. Should allow exporting of capital gains to popular tax preparation software such TurboTax and H&R Block. the feature should also help reporting of Wash sales.

Price Alerts

Price alert types, such as fixed price, trailing stop loss, or moving average alerts.

Yield Calculations

The feature should allow calculations of True GIPS (AIMR) compliant returns.

Multiple Currency Support

Typically around 25 different currencies are supported by major software platforms.

Bond Support

Should Calculate accrued interest, and a variety of bond information such as yield to maturity, current yield, annual income, next payment date and amount, Retrieve Historical Dividend and Split Data Retrieve past dividends and splits on investments. Useful for when the data is not available from your broker or fund company, or when you're investigating investments you may not own.

Trailing Stop Loss Alerts

An alert type useful for limiting down-side exposure. Triggered when the price of an equity drops by a certain percentage. Trailing stop loss alerts can be used for short positions as well, but will be triggered when the price of a stock rises by a certain percentage.


Moving Average Alerts

An alert type to notify a user when the price crosses a moving average.

Advanced Statistics

Alpha, Beta, Correlation, R-Squared, Standard Deviation, and Sharpe Ratio calculations for investments, portfolios, asset types, investment types, sectors, or investment goals.

Risk/Reward Scatter Plots

The risk/reward scatter graph allows you to analyze performance versus risk taken.

Correlation Matrix Report

The feature should allow viewing the relationships within Asset Type, Investment Goal, Sector, Investment Type, or Currency.

Portfolio Suggestion

Based on optimization methodologies used in Modern Portfolio Theory, the feature typically suggests a certain portfolio, taking an investor's current portfolio, or his/her risk - return profile as an input. For example, younger individuals are more likely to invest in more risky assets such as growth stocks, whereas older investors may invest in more stable assets such as bonds. The feature typically manages market risk reduction through examining of asset correlation and mean-variance optimization. The goal is to maximize the investors Sharpe Ratio - the level of return that he or she earns per level of risk.

Companies providing Portfolio Management Software

See Companies providing Portfolio Management Software

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Great Additional Resources

1.) American Association of Individual Investors (AAII): [1]
  1. http://www.aaii.com/computerizedinvesting/article/the-top-portfolio-management-software
  2. http://news.morningstar.com/classroom2/course.asp?docId=4549&page=3&CN=
  3. http://www.investopedia.com/articles/trading/03/080603.asp

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