Tag Archives: smart benchmark

How to understand the figures of my portfolio to obtain better results? (I)

It sounds very nice when you think that you have your own investment portfolio. It is an important step to improve your finances and get your goals. The question is that a portfolio has its own life since its inception and your responsibility as investor is guiding the portfolio to your interests. What are the signals that you have to follow?

Well, there are many figures and parameters to measure the quality of your portfolio, but we will select the main ones in order to get the most important data:

  • The performance evolution: the figure alone is not enough, because it has to be put in comparison to others. We recommend comparing it with the smart benchmark. This comparison provides the view to understand if we have chosen the right assets or not. For instance, this example shows that we are far from the benchmark and there is a wide improvement to manage.

portfolio performance in T-Advisor

  • The weight of the assets in your portfolio: it is also relevant to understand the allocation. If we have a concentration in a country or a sector, there is a high risk to suffer from instability, if the trend changes. Diversification reduces risks, but we can have some assets with lower returns. A good analysis can help us look for similar assets with better figures in order to rebalance the portfolio.

weight of assets in a portfolio

  • The relationship between performance and volatility: first of all, volatility does not mean necessarily more risky, as we have already commented. However, we can understand the connection between performance and volatility through the Sharpe ratio. This figure shows how profitable an investment is related to the historical volatility. The higher the ratio is, the better the investment is… but this idea is not totally right if we do not compare two assets. You can find two assets with similar ratios but with different figures. We have to look into the numbers to understand if it has a high performance with a high volatility.

Portfolio sharpe ratio

There are some other figures that we will soon comment.

Is my portfolio working or not?

Portfolio main screen in T-Advisor

Investors organise efficiently their investments in portfolios. That’s the rule, but the question is: how to follow up my portfolio? Can I preview somehow troubles in my investments? Which ratios should I take into account to set and allocate my assets?

There are some indicators that give us some clues whether we are right or wrong and the changes we have to decide:

  • Returns: of course, this is the first one. As investor, you do not have to be anxious about the short term, because volatility is our current rule. You should use a tool that provides you different terms in order to compare the evolution. However, you have to think about changes if the returns are negative in the middle term.
  • Comparison with other references: it is a good idea to compare the evolution of your portfolio with the benchmarks (an index or a smart benchmark). This comparison will help you evaluate a proportion of the profits or losses that you get and diminish or underline the importance of the result. For instance, if your portfolio losses 3% and your benchmark losses 5%, it is not so bad. You are better than the index, although you should consider change your strategy, it the negative trend intensifies.
  • Diversification: get charts about the proportion of the assets in your portfolio related to regions, currencies and asset category. A diversified allocation will help you avoid several risks.
  • Risk: this is actually the second most important indicator after returns. Analyse the volatility, the value at risk (VaR) and the risk contribution of your positions. A segmented analysis will focus better your next decisions. Should I keep, sell or buy? Another quite important figure is the Sharpe ratio to understand how interesting is assuming risks in order to obtain certain returns.
  • Trend: you should as investor use tools to get the portfolio trend, if bullish or bearish.
  • Portfolio and investor profile consistency: is your portfolio consistent with your investment profile, your risk tolerance and your expected returns? That is another question that you have to ask yourself.

You need tools to make a full analysis and obtain a whole view over your portfolio and take the best decisions to improve your results. It is important that you get unbiased indicators, watch risk and returns, understand everything and take rational decisions, never guided by a short term situation. At the end, it is not only about profits, but above all capital preservation. The T-Advisor platform offers these figures so that everyone can set and allocate assets their own portfolios in the most efficient way.

My goal in bearish markets: capital preservation

Markets are currently very volatile. We have lived a strong bearish period, but it is not sure that the bulls are coming, as the trend is not clear yet. In this case, panic is the worst adviser. On the contrary, investors have to analyse properly their portfolios to take right decisions. If you are not a trader, if you are a long-term investor, then you have to assume that it is difficult to avoid losses in some periods, moreover when all markets are dropping. So, your goal has to be another: capital preservation.

What does capital preservation mean? Your goal as investor must be to keep your assets with the less possible losses or, of course, to obtain benefits. As there are many changes in the long term, then you have to concentrate your worries in the bearish times: how much are you losing? The success is not to lose or lose less than the reference markets, but how can you get that information? The answer is smart benchmark.

Smart benchmark chart in T-Advisor

The picture above is very clear: my portfolio is losing, because I have invested in a market that is going hard into negative, but I only lose -2.4%, while the reference market (the smart benchmark) loses -14%. Not bad, huh?

As we regularly say, it is important to have available the right tools to analyse your investments and take decisions. Capital preservation has to be your first goal. Don’t lose money or lose the least. Then it the bullish times, your goal has to be to outperform the reference market.

The following chart is even clearer:

Portfolio risk figures

My Germany portfolio is much better than the benchmark: quite less losses in a bear period, less volatility and better Sharpe ratio.

What other tools do I have to consider risks in order to preserve my capital?

  • Analyse how your positions contribute to risk your portfolio. In this case, you can find out if you have an uncomfortable asset to be substituted.

Risk contribution chart in T-Advisor

Risk profile comment with portfolio risk in T-Advisor

  • Consider the diversification. In bearish periods, diversification is a great help to avoid hard losses. You can analyse it with the diversification benefit, that compares how much you win if your portfolio has different assets:

Diversification benefit in T-Advisor

  • Look at the Value at Risk, which measures the probability of having a certain level of losses. As you can see, my portfolio has the worst VaR, what means that I have to consider some changes in my allocation to avoid future losses.

Portfolio risk table in T-Advisor

All these figures will help you to understand your current position and risk. Then you can decide if you have to rebalance totally or partially your portfolio. The strategy is clear: keep your capital and set your portfolio to lose less in bad times and outperform the benchmark in growing times.

Rebalancing, the successful investment strategy

Is it worth rebalancing or not? It is usually said that a regular rebalance let investors deal better with the market volatility, avoiding the worst effects of sudden negative movements. Rebalancing means capital preservation as the focus of every investment strategy.

In T-Advisor, we apply systematic rebalances every second month for our model portfolios in order to avoid possible losses and improve the performance. Let’s take an example with our Germany stocks model portfolio.

T-Advisor Germany model portfolio main figures

Main figures say that 1-year-return is 34.45%, which is a very nice performance. But this result was only possible to reach with the right tools to select the assets and the regular rebalances. First of all, the portfolio has 10 different assets to diversify the investment. But let’s have a look if we compare the portfolio evolution with the reference indexes. How? With our smart benchmark.

In T-Advisor, you can clone all model portfolios to include them in your investments. If we do it now, we obtain the following results:

Rebalancing: comparative performances

As we have just done the cloning, there is no YTD figure. Smart benchmark is our composite figure that takes into account the proportion of your assets in every benchmark, as we already explained in this blog. Figures say that our portfolio overperformances the smart benchmark. But the system also offers a simulation for the last month:

Comparative chart in T-Advisor

The portfolio has always overperformanced the smart benchmark since last rebalancing on February, the 9th.

If we look it in another way: DAX has on February, 25th, 2014, a level of 9,699.35 points. On October, 15th, the worst day in the year, the level was 8,571.95. To sum up: -11.62%. What happened with our Germany portfolio in the same period? – 10.37%. And what about yesterday? If we compare the whole year, DAX has grown 15.53%, while our Germany portfolio has done 34.45%. As you can see, it’s worth doing a rebalance.

In our case, our system works to find the best assets filtered by our scoring criteria. Every two months, we analyze the assets that work and don’t to create a new successful mix. Our methodology let us say that none of our ETF model portfolios, for instance, has never negative 1-year-returns.

Discover the new improvements in T-Advisor

T-Advisor is a suite of advanced and professional investment tools for individuals and advisors. As a technological solution, our team is always working to improve features and usability. We know that perfection is impossible to reach, but we work as it isn’t, so that our users could not find any other better solution than ours.

What are the main last improvements? Firstly, the performance chart in your portfolio. You can choose the period to compare your portfolio with the smart benchmark and you can also select another chart to see the portfolio valuation.

T-Advisor improvements: performance chart

Portfolio performance chart in T-Advisor

T-Advisor portfolio valuation chart

We have also improved our list of assets, setting categories to find the ones you are looking for. The list has deeply grown: 41 world stock indexes, more than 100 international fund managers, 20 exchanges, as also bonds, certificates and currencies.

T-Advisor asset list

We have also implemented a new module: our investment planner. We proudly announce this implementation, as we have set an easy-to-use tool: up to 7 different plans (from housing to retirement) and advanced settings to take into account inflation and tax effects. At the end, you obtain a report with a suggested allocation depending your profile and a capital projection for the selected period of investment.

T-Advisor investment planner home

T-Advisor investment planner projection

In our version for professionals, the upgrade focused in the usability to manage clients and the performance figures related to their investments.

This is not the end. T-Advisor is steadily working to develop new features and settings and include a better usability. Our aim is that our users feel totally satisfied managing their investment with us. So many tools just for 0€? Of course! Please enjoy them!

Smart benchmark, an automatic reference for your investments

Investors do not focus just on one stock, but in many of them. Moreover, investments usually organise in portfolios with several kinds of assets: stocks, ETF, mutual funds… With such mixture, it is difficult to follow the composite performance, if the investor do not have available the right tool.

For these cases, we have to follow the benchmark. What does it mean? The benchmark is the reference for your portfolio. It is an easy figure to be reported whether your portfolio is on-track or in the opposite way to achieve your performing target.

Let’s have a look at this picture from T-Advisor:

Smart benchmark with other figures in T-Advisor monitor

What information do we have available? First of all, we have the performance of our portfolio from the beginning of our investments and from the beginning of the current year.  Below it, we have the benchmarks from the indexes where we have assets in our portfolio and… the smart benchmark.

Smart benchmark is a functionality provided by T-Advisor for its users. You do not have to calculate, because T-Advisor automatically shows the figure. What information do you get from it? It mixes the different indexes benchmarks in the proportion you have in the portfolio and obtains a composite benchmark. So, you can compare if you are on-track or far from the performance you are looking for and from the market trend.

But you get still more in T-Advisor with smart benchmark. You can also compare the portfolio risk with the benchmark risk, comparing performance, volatility, value at risk and shape ratio. These figures report accurately to take decisions about your own investments: am I wrong with my investments? What should I change?

Smart benchmark in portfolio risk T-Advisor monitor

Finally, it is to underline that T-Advisor has developed this tool so that every user has at his or her disposal an automatic reference to compare the evolution of his or her portfolio and take the best decisions to maximize the investments.

Our General Manager Jaime Bolívar talks about T-Advisor

T-Advisor, the advance wealth management software launched last year for personal investments, is a milestone in this kind of developments. T-Advisor General Manager Jaime Bolívar explains some details about the suite.

Question: Mr. Bolívar, you are also Techrules General Manager, a leading company that offers software solutions for the financial sector. T-Advisor is focused mainly in individuals. Why did you take this decision?

Answer: Techrules has more than 20 years of experience developing the best solutions for financial entities with a high success. Nowadays individuals have many channels to manage and decide about their investments, because they have a lot of information available through the Internet. But a lot of information does not mean being well informed. That was our point: organise and provide highly accurate and visual information, so that everyone could take the best decisions for their investments.

Q: There were already tools to manage own investments. What are the strengths that any investor can find in T-Advisor?

A: T-Advisor was conceived for individuals that even do not have deep knowledge in markets. That is why the suite is very visual and has many ratios to follow the performance and the risks of their investments. We are very proud about our tools of market opportunities, updated every week; our smart benchmarking tool, to help investors compare relative performances in their portfolios; and our quant model portfolios, defined by profiles and countries, so that a particular can join them. These quant model portfolios designed by T-Advisor are performing incredibly well: the weakest, for a conservative profile, produced a 5.3% return and the strongest climbed to a 69%, linked to the Nasdaq. And we are continuously improving, updating and creating new tools in the suite.

Q: What about investment information from different countries? Is that possible?

A: Of course, that is another of our strengths. You can find market opportunities in 29 different exchanges, from Europe to USA and emerging markets. Our watchlists provide assets from a wide range of indexes and institutional investors. And also our global trend tool shows performances in 32 different countries around the world. A particular investor can decide investments from his or her mobile in South Africa, China or US, if he or she checks in T-Advisor that the best opportunities are there. And they can do it through T-Advisor.

Q: Is it difficult access to T-Advisor?

A: Absolutely not. Just register in our website www.mytadvisor.com and begin to invest. Our customers can open a free trial account for three months. We are so sure about the quality of our suite that we know that, after this period, they will not be able to avoid investing with T-Advisor.