I just created a free new tool for you to kick off the New Year and today I’m sharing it with you, along with screenshots and detailed instructions on how to use the tool to manage your asset allocation.
If you’re like me, you’re diligent in conducting a Year-End Financial Review. (If not, you should, and I encourage you to check out A Step-By-Step Guide For Your Annual Financial Update). That review includes analyzing your Asset Allocation and determining appropriate rebalancing actions.
I encourage folks to use Personal Capital (affiliate link) for that task. I’ve used their automated asset allocation dashboard for years and find it helpful as a part of my annual review. I previously built this Guide To Asset Allocation spreadsheet for folks who use Personal Capital to calculate their Asset Allocation.
But what if you’d prefer to not use Personal Capital?
Today’s post is focused on a major change I just made to a popular free spreadsheet on my site, which will now allow you to calculate your asset allocation without the need for Personal Capital. Even better, the modifications will automatically link to your Net Worth figures and determine what rebalancing you need to do in your portfolio. I actually do the exact same process every year-end as a comparison to the Personal Capital results.
The change to the free spreadsheet came at the request of a reader. Pamela, I hope you’re pleased with the result.Today, a free new tool I just developed to help you manage your asset allocation. Click To Tweet
A Tool To Manage Your Asset Allocation
PLEASE READ THIS FIRST: I get hundreds of emails asking for editing permission on my free spreadsheets. Please don’t do that. To use the spreadsheet I’m demonstrating below, you need to click “File,” and then “Make A Copy” before you can enter your personal data into the spreadsheet. Alternatively, you can click “File,” then “Download” then “Excel” to save it as an Excel spreadsheet. This protects the original template for other readers and ensures your data isn’t accidentally shared with thousands of other readers.
Introducing The New Tool
The free Net Worth template I created years ago has been downloaded by thousands of readers, but I just made a major improvement. Now, when you open that spreadsheet, you’ll see a new tab titled “Asset Allocation” that is linked to all of the figures in the net worth spreadsheet. When you update the net worth figures, you can click on the Asset Allocation tab to also determine your asset allocation. Finally, the revision also allows you to enter your targeted asset allocation and automatically determines rebalancing requirements to meet your target.
With that introduction, let’s walk through the steps:
Update Your Net Worth
The Net Worth spreadsheet opens to the Net Worth tab. After making a copy of the file for your personal use, simply fill in the net worth spreadsheet (screenshot example below), changing the rows as required to suit your investment holdings.
Enter Asset Allocation Data
After entering your net worth data, toggle over to the Asset Allocation tab and follow the directions. After updating links for any changes you made on the net worth page, enter the allocation for each investment owned. For example, if you have a money market fund, you’d enter 100% in the cash column. For mutual funds, you can check on your financial institution’s website (or Yahoo! Finance) to find the allocation for each fund. You may find it necessary to go back to your Net Worth tab to break holdings down into more granular detail (e.g., if you hold a bond and an equity fund in your IRA, you’ll want a row for each).
Review Asset Allocation Result
After entering your data, scroll to the right to see your personalized pie chart showing your current asset allocation:
Determine Your Targeted Asset Allocation
Scroll down to the next section in the spreadsheet and enter your targeted asset allocation. To read more about how to determine your targeted asset allocation, read A Simple Guide To Targeted Asset Allocation.
Compare Your Actual Vs. Target Asset Allocation
Scroll down a few lines to see the automatic comparison of your actual asset allocation vs. the target you’ve established:
Review Your Rebalancing Actions
Based on the results above, you can determine what action should be taken. Add personal notes to establish your action plan:
For those who prefer the manual approach over PersonalCapital (affiliate link) to manage your asset allocation, I trust you’ll find value in the modifications I made to the free Net Worth template. I appreciate Pamela for asking the question and hope you’ll all find value in the thinking.
Even if you have your own way of tracking your net worth, I believe there’s merit in adding the asset allocation analysis to your net worth spreadsheet. While it takes a bit of manual work to research the asset allocation for each investment you own, it’s a reliable way to know your actual asset allocation.
Comparing your actual asset allocation to your target helps define actions required to rebalance your investment portfolio to match your risk profile. It eliminates the emotion and helps to identify areas where you may have over/under exposure to asset classes.
I hope you find value in the spreadsheet. Apologies in advance that I won’t be able to answer everyone’s specific questions on formulas, etc., and trust you understand. I have faith you’ll be able to figure it out or modify the system you’re already using to incorporate a method of tracking your asset allocation that works for you.
Happy New Year – looking forward to all the new year has in store!