Tracking asset allocation across multiple accounts
How to keep track of asset allocation across many accounts
Recently, I've been talking a lot about my portfolio, why I chose to manage it myself, and how I came up with my asset allocation. One thing I haven't mentioned is the real world complexity of actually keeping track of these investments. With individual taxable investment accounts and retirement accounts spread across different providers, it can get a little confusing trying to measure my progress, allocation, and income.
One solution would be to consolidate all of my accounts in a single location. Unfortunately, all of my retirement accounts are at Fidelity, and all of my banking and taxable accounts are at Merrill Lynch. I can't move the accounts from Fidelity because my 401(k) has to be at Fidelity. I can't move my accounts from Merrill because Fidelity doesn't have the checking and other services I need to run my daily life. Plus, I'll be honest, it would be a pain in the ass to have to update everything.
In short, there are a bunch of different accounts with measurable investments that I have to keep track of... and it would be difficult to simplify that.
Fidelity Rollover IRA - Traditional (ex. employer 401k match)
Fidelity Rollover IRA - Roth (ex. employer 401k contributions)
Fidelity 401k - Current employer 401k
Merrill Lynch Taxable - Main Portfolio
Merrill Lynch Taxable - Small fund for option speculation
Merrill Lynch Taxable - "Operating" Fund
To make it even more complicated, the investments I have to choose from in many of my retirement accounts are different from the ones I have chosen for my personal portfolio. I usually use similar index funds, but it does make it harder to track with nearly 25 different funds. I've also added another layer of complication by attempting to keep the funds that generate the most income in my non-taxable accounts.
In short, although there is a single guiding principle behind my portfolio, it is a bit of a jumbled mess in execution. It makes it hard for me to track my performance across a mess of accounts and investments.
Keeping track of my allocation across accounts
I do have a method to my madness, however. I use Personal Capital to keep track of my entire financial life, including my mortgage, checking, retirement, investment accounts and even my house value (they have a Zillow connector). Beyond the basic features, there are some extremely helpful investment features for tracking allocation across accounts that everyone should try to take advantage of... especially if you are managing your own investments like I am.
It's fairly simple to use, as well. After connecting all of your accounts, if you click the investment tab you'll have the ability to choose your risk tolerance. This will spit out a recommended portfolio, and compare your current allocation to the allocation they advise based on your risk tolerance.
Risk tolerance - As you can see I am very aggressive... but not the most aggressive.
Select the accounts you want to use.
This is pretty powerful. I can track anything I want to...and leave out the accounts that aren't part of my portfolio. Being able to have this selection makes it 1000% easier to keep track of my allocation (below).
Current allocation vs target allocation - I am bullish on emerging markets and non-US markets in the mid to long term, hence my stubbornly high allocation there.
Another very helpful feature is the efficient frontier chart. The efficient frontier is a method of plotting risk and return based on historical data. Generally, it's impossible to be beyond the line, but you want to be as close to it as possible to create the greatest opportunity for growth while mitigating risk at the same time
Performance over time - Again, I don't expect historical returns to match the next 5-10 years, which is why I am sticking to my chosen allocation.
It can be a real pain to keep track of asset allocation across multiple accounts, but it's important to know where you are and if you are close to your chosen asset allocation. Personal Capital has a great suite of free tools to help with this.