How to review your Asset Allocation?

Asset Allocation Review

Last month, March 2017, after completing article “Things to do before March 31” I decided to verify my Asset Allocation. A few months back I did review of my investments, wherein I ran few basic checks to find out if my selected funds are doing what they are supposed to do. But, review of funds and review of asset allocation is not the same thing. Review of funds is to verify whether funds are on right track wherein review of asset allocation is to verify whether I am on track with asset allocation, which I had planned earlier, or I am drifting towards any one asset, probably Equity as markets are reaching heights.

As I am managing my Portfolio at Value Research Online my first thought was to use their analysis section to understand if I am on the right track. As you can see below a snapshot of my current Asset Allocation as per VRO. As per my age based formula described on Asset Allocation article I am on edge of my tolerance limit of 5%. But the situation seemed to be in control as I have few SIPs registered for Equity and STPs for Debt to Equity, so my Equity allocation is going to go up in the coming year. No need to panic yet.

April 2017 Asset Allocation

Above portfolio chart did help me to review my asset allocation. But there are few pitfalls of doing review this way. First, not all Debt transactions are considered in above Asset Allocation, for example, EPF / PPF / Cash (and Equivalent) etc. Not a mistake of Value Research Online, they do offer ways to add such transactions but keeping them in sync is simply too much of a task. Second, above is just a snapshot of current situation but in real life we do change our strategies every few years, so tracking how each strategy worked over a period of few years and what kind of impact we have had a particular year is not depicted because above is just a snapshot of current and does not show history of my asset allocation.

I tried to find such a tool at FreeFinCal, but there was nothing such which captures the history of my Asset Allocation, and how it worked. BTW, FreeFinCal does have many awesome tools to analyze stocks and mutual funds. I have high regards for Pattu (M Pattabiraman), who develops such tools (at times in collaboration with others) and blogs about financial topics through FreeFinCal.

In search of finding the tool for my Asset Allocation review, which can log my history along with the comment, I stumbled upon a Forbes article. The article nicely covers similar idea. It does not have a readymade tool to use but it gives enough of details for any excel enthusiast to build a tool to cover exact idea I was looking for.

Historical Asset Allocation, Idea from Forbes.

As you can see, above graph covers all the requirement I am looking for with my Asset Allocation review process. It gives time bound Asset Allocation to track how I have been doing, and pinpoint what has worked and what not. The table from which I could create such a graph could have comments along with data to support why it worked or did not work. I am in progress of creating such a tool on Google Spreadsheet, I will share it when it’s in the right shape to share.

Believe me, this exercise was worth every effort I had put in. It clearly uncovered all my hidden investments which I did not calculate in my Value Research Online based review. I do have data points for Jan month and March month of this year. But frankly speaking, I am ashamed to share that snapshot as of now, because after putting all data points my Equity allocation is 38% only, too low. I am sure, it will take me few months/years to correct my asset allocation. The panic situation has just kicked in. I surely would have missed other investments if I would have concluded my review with Value Research Online, not their fault but I needed something of running annual log and they offer snapshot as of now.

I am sure Forbes article will help you uncover hidden investments which might be missed in your review. Do run them through excel and let me know if it did help.


Image Credit: Retire Happy

Also published on Medium.