Any tool to do this Allocation Math?

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grtwallchina75
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Joined: Thu Mar 15, 2012 11:04 am

Any tool to do this Allocation Math?

Post by grtwallchina75 »

Folks,

Is there any tool or website out there which will tell me how many shares of ETF/Mutual Funds I need to buy based on my asset allocation percentage and specific dollar amount to invest?

example:

Fund1 - 60% -- Already auto invested in my 401k

Fund2 - 25% -- Need to invest

FUnd3 - 15% -- Need to invest

Say, I have $1000 left I need to distribute on Fund2 and Fund3 with the above AA % and buy shares based on present price...

Do I have use Excel or Math or any tool out there to do it for me allocating $1000 for Fund2 and Fund3 with overall AA % and give me how many shares to buy...

I dont see M* Portfolio Manager or X-Ray can do this?
livesoft
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Re: Any tool to do this Allocation Math?

Post by livesoft »

If you have access to M* portfolio manager, try this:

Do M* instant X-ray with dollars amount. Then save or convert this to a portfolio. Look at the number of shares in the portfolio.
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Topic Author
grtwallchina75
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Re: Any tool to do this Allocation Math?

Post by grtwallchina75 »

right - the issue is i dont know the partial dollar amount i should allocate in fund2 and fund3 in M* X-Ray, given my overall AA...

I am sorry I am not understanding this right...
livesoft
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Re: Any tool to do this Allocation Math?

Post by livesoft »

Repeated guessing works surprisingly well.
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Kevin M
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Re: Any tool to do this Allocation Math?

Post by Kevin M »

You can use a spreadsheet; there are many ways to do it. One way is as follows.
  • Enter your current fund values in one column.
  • Enter your target percentages for each fund in another column.
  • In another column multiply your target percentages times total portfolio value to get target values for each fund.
  • In another column subtract actuals from targets.
  • Use another column for your estimated additions or subtractions to/from each fund
  • In another column add your additions/subtractions to the current values to get projected values after additions/subtractions.
  • In another column subtract the projected values after additions/subtractions to/from the actual values.
  • Use trial and error in the additions/subtractions column to minimize the deltas between actuals and projected.

It only takes a couple of minutes of playing around with additions and subtractions to get close to targets.

It sounds more complicated than it is if you know how to build simple spreadsheets. Once you build the spreadsheet, it's quite easy.

If you want to go more crazy, you can use ETFs with a function to pull current % change while market is open (e.g., GoogleFinance); ETFs that are representative (or even share classes) of the mutual funds. Use the ETF % changes to estimate changes to mutual fund values, and use these values instead of yesterdays closing values to do your calculations.

Someone has developed a tool that does what you want more simply, and posted about it here, but I don't have the link handy, and since my spreadsheet approach works for me, I didn't investigate it.

Kevin
If I make a calculation error, #Cruncher probably will let me know.
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Aptenodytes
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Re: Any tool to do this Allocation Math?

Post by Aptenodytes »

livesoft wrote:Repeated guessing works surprisingly well.
I second this. The market is going to introduce shifts month to month far bigger than the difference between an exact solution to your math problem and a reasonable guess. What's the point of figuring it out to the cent on day 1 if by day 30 it will be bumped off course by the market?

Unless you are exceptionally bad at math just make a reasonable guess.
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SpringMan
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Re: Any tool to do this Allocation Math?

Post by SpringMan »

I would invest the whole $1000 in the fund with the lowest percentage with respect to your desired portfolio. As I learned in quality training, close enough is good enough :happy . Investing is much like horse shoes or hand grenades when it comes to close. Or, as livesoft suggested, take a guess.
Best Wishes, SpringMan
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#Cruncher
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Re: Any tool to do this Allocation Math?

Post by #Cruncher »

As I understand your situation, contributions to Fund One are a given and you only want to know how much to contribute to Funds Two and Three in order to make the overall allocation come out. Here's the layout of a simple spreadsheet that will do it:

Code: Select all

Col ->  A            B        C       D        E         F
                  Current   - Allocation -   Need to    New
Row   Fund         Value    Actual Desired   Invest    Value
---  --------     ------   ------- -------   ------   ------
4    Fund One      9,000    64.3%     60%              9,000 
5    Fund Two      3,000    21.4%     25%      750     3,750 
6    Fund Three    2,000    14.3%     15%      250     2,250 
7    Two + Three   5,000    35.7%     40%		
8    Total        14,000   100.0%    100%    1,000    15,000
9    Amt Needed    1,000
You plug your figures into cells B4:B6 and D4:D6. The tricky formula is the one in cell B9 that determines how much you need to invest in total into Funds Two and Three: =(B8*D7-B7)/(1-D7)
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CyberBob
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Re: Any tool to do this Allocation Math?

Post by CyberBob »

confusedinvestor wrote:Is there any tool or website out there which will tell me how many shares of ETF/Mutual Funds I need to buy based on my asset allocation percentage and specific dollar amount to invest?
Optimal lazy portfolio rebalancing calculator

Bob
heyyou
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Re: Any tool to do this Allocation Math?

Post by heyyou »

Your allocation will be shifted each day by the daily price change of each of your funds, so precision today is temporary.

You have to choose an allocation, but long term, the returns from your allocation choices and your investing dollar amounts will be particular to your specific time in the market.

The optimal allocation will also change, and whatever you choose now will not be the optimal one for the period from now until you spend your last dollar.

I chose 10% increments to make mine simple. Some of my slices are two tenths or three tenths, but tenths are easy building blocks to use.

My experience has been that my rejected choices will usually outperform what I chose, but I'm happy with the returns that I did receive. Wishing for what the optimal allocation delivered last month or last year or last decade will make you unhappy.
chipmonk
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Re: Any tool to do this Allocation Math?

Post by chipmonk »

confusedinvestor wrote:right - the issue is i dont know the partial dollar amount i should allocate in fund2 and fund3 in M* X-Ray, given my overall AA...

I am sorry I am not understanding this right...
Have you looked on the Bogleheads wiki? There are a number of spreadsheet templates available for this purpose: http://www.bogleheads.org/wiki/Using_a_ ... readsheets

Personally, I use the second spreadsheet, which breaks your portfolio down into a cascading series of asset classes, and tells you how much you need to add/subtract from each to hit your desired allocation. Works well for me.
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