Planning Trades & Rebalancing

Overview

Planning Trades and Rebalancing is a sophisticated tool to help you rebalance your portfolio as well as perform explicit trade planning. The facility is available from Portfolio Manager window as shown in the screenshot below.

Portfolio rebalancing allows you to set desired allocations for stocks in your portfolio by percentage. You can also set a drift tolerance, which is how much you are willing allow your portfolio stray from your desired allocations. Stock Rover will then show you what is out of balance and by how much, as well as the trades you need to make to get back in balance.

To learn more about rebalancing, be sure to check out our blog post Rebalancing Your Portfolio.

The rebalancing facility in Stock Rover also facilitates trade planning. Trade planning is done by switching the planning mode to quantity. You can then make changes to the quantities held for various positions in your portfolio. You can also add new tickers or eliminate positions.

Both rebalancing and trade planning allows you to test potential trades. Based on your planning input, an alternative version or model of your portfolio is created. You can then compare the planned or model portfolio against your actual portfolio across number of key analytics such as historical return, maximum drawdown, risk adjusted return vs. the S&P 500, correlation with the S&P 500, beta, volatility and the Sharpe ratio.

You will also be able to see the difference in aggregate financial measures for the actual vs. planned portfolio for such things as Price/Earnings, Price/Book and Price/Sales, as well as aggregate dividends and dividend yields. You will also be able to examine differences in the sector allocations of the actual vs. planned portfolio.

The goal of the rebalancing facility is to assist you in making intelligent changes to your portfolios to achieve your investment objectives by demonstrating how potential trades affect the portfolio across many different factors.

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Mechanics

Rebalancing a Portfolio

With ‘Plan By %’ checked as highlighted in the screenshot you can rebalance your portfolio. Under the ‘Planned Value %’ column, you can enter in the desired percentage for each position in your portfolio. See the screenshot below.

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Once the percentages are entered, rebalancing will highlight the changes. A green row indicates you would need to add shares to get to the target percentage. A red row indicates that you would need to reduce shares. Uncheck the ‘Highlight Changes’ box if you’d like to remove row coloring. In either case the Planned Quantity and the Planned Trade columns will indicate the new quantity needed and the amount to trade to get there.

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Trade Planning

Trade Planning can be done with the ‘Plan By %’ option unchecked (see screenshot below). This allows you to enter trades by new quantity and see the results. Trade planning creates an alternative version or model of your portfolio. The model allows you to test potential trades, and see their effect on the portfolio.

To begin trade planning, type in a quantity into the cells under the ‘Planned Quantity’ column highlighted in he screenshot below. If you have ‘Highlight changes’ checked, an increase in shares will cause the row to turn green, and an decrease in shares will cause the row to turn red. The ‘Planned Quantity’ starts with the same value as the ‘Current Quantity’ value. When you change the quantity, the ‘Planned Value ($)’ column will update with the Planned Quantity multiplied by the price (which is the current price.) You can see the Planned Trade and Planned cost in the last two columns. The ‘Planned Value (%)’ column will show the impact on portfolio of the trade by percentage.

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Add a Ticker

To add a ticker to the planned portfolio, click .Add Ticker’ in the top right. To remove any tickers, you can click the ‘x’ next to the ticker name. See screenshot below.

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This is the window that appears after clicking ‘Add Ticker’, here you can enter the ticker or bring up the search for a ticker by starting to type in the ticker box.

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Changes to Multiple Tickers

Under the More pull down there are options where you can make adjustments to multiple tickers in the portfolio. Change % Multiple Tickers allows you to make % changes to several tickers at a time.

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Allocate Equal Weight to Each Position

Allocate Equal Weight to Each Position allows you to enter an equal weight to each position. See screenshots below.

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Allocate Equal Weight Within Sectors

Allocate Equal Weight with in Sectors allows you to enter a percentage to an entire sector. Within the sector, each position will have an equal weight. See screenshots below.

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Change Cash % and Adjust Positions

Change Cash % and Adjust Positions allows you to enter the cash percentage you desire for the portfolio. Then each position will be adjusted proportionally to achieve the desired cash position. See screenshots below.

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Reset Portfolio, Import, Print, and Export

In the top right hand corner of the Holdings tab, you do have the ability to Reset the Portfolio. Resetting the portfolio means the model will be deleted, which will result in the actual and planned values becoming the same.

The import option allows you to import holdings from a file. You also have the ability to print or export the planned portfolio.

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Enable Multiple Portfolios

With Multiple Portfolios checked you have the ability to select multiple portfolios and view the holdings. However no changes can be made as the quantities are aggregated across portfolios.

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Drift Tolerence

The drift tolerance is the percentage change or drift from ideal that you will allow before executing a rebalancing trade to bring the portfolio back into balance. For example, if you have a balanced target allocation of 10% for a position, and if it currently has a 12% allocation, then the drift is 2% from ideal. If your drift tolerance was set to 3, portfolio rebalancing would not plan a trade. However if the drift tolerance was set to 1, a trade would be planned to get back to the balanced percentage.

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Analytics

As you make changes to the planned portfolio under the Holdings tab, the data under the Analytics tab will update as you change the planned quantities to show comparison between your actual portfolio and your planned portfolio. The analytics are calculated over the selected time period. Historical Return shows what your return would have been if you’d made trades at the beginning of the selected time period. The next set of metrics use data from the selected time period to calculate risk in various ways, and compare that to those same metrics had the trades been executed at the beginning of the time period. The time period can be adjusted in right hand corner

Also in the right hand corner is the ability to reset the portfolio, print it or export it.

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Aggregate Portfolio Metrics

As you make changes to the planned portfolio under the Holdings tab, the data under the Metrics tab will update to reflect the differences between your actual portfolio and your planned portfolio for key portfolio statistics such as Price to Earnings, Price to Book, Earnings Growth and Dividends.

As highlighted in the top right hand corner, you can also reset, print or export the portfolio.

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The sectors tab shows the cash position as well as the sector breakdown for the actual portfolio vs. the planned portfolio. The top right hand corner also gives you the ability to reset, print or export the portfolio.

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Portfolio Sector Allocation

The Portfolio Allocation tab displays the allocation by equity type for the actual portfolio vs. the planned portfolio. If you click on a particular piece of the pie you can drill down to see further breakdown of the portfolio.

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After clicking on a piece of the pie, it will break it down further, by sector, funds or ETFs.

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There is a additional drill down if you click on a sector in the pie chart where it will show the stocks from that sector.

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