Using this Site

InvestorCraft is designed to help you, as an investor, to better understand your investment portfolio(s).  It provides tools to help you understand, analyze, build, and track portfolios of investments, including mutual funds, exchange-traded funds, and individual stocks.  There are several different approaches that you can use in utilizing InvestorCraft’s resources: 

• Analyze an existing portfolio – use InvestorCraft’s portfolio analysis tools on a current portfolio of investments to understand its degree of diversification and performance.
• Analyze/build a new portfolio – use InvestorCraft’s portfolio analysis tools to understand the advantages and disadvantages of adding different securities to a new portfolio.
• Adjust an existing portfolio – use InvestorCraft's portfolio tools to understand the possible impact of adding or removing a security to an existing portfolio .
• Communicate with other investors – use the InvestorCraft community forum to post questions and browse information posted by other investors with similar interests.
• Education/fun – enter your portfolio in the site’s monthly, quarterly or annual competition, and use the site’s tools and articles to increase your knowledge.

Analyze an existing portfolio

You can use the site’s tools to better understand the level of diversification and long-term performance of your current portfolio.  InvestorCraft has a database of over 3000 mutual funds, stocks and ETFs.  Build a portfolio matching yours, and then run it through the various tools on the site.

• Correlation Analysis – use this tool to understand the level of diversification in your portfolio.  After doing so, you will be able to answer the question, “Am I diversified?” 
• Efficient Frontier – use this tool to understand how to optimize the risk/reward ratio of your portfolio.  The efficient frontier determines what would have been the optimum weighting of the assets in your portfolio for a past time period.
• Sharpe Allocator – use this tool to gain a different perspective on your portfolio allocation and compare it to the results of the Efficient Frontier.
• Save your portfolio to My Portfolios and track its performance over time.  You can adjust the asset weights in the portfolio to match your actual portfolio’s weights.  Or you may want build a separate portfolio to do that, so that you can compare the performance of your portfolio against that computed by the Efficient Frontier or Sharpe Allocator.
• Enter your portfolio in the site’s portfolio competition if you would like to match your portfolio building wits against those of other investors.

Adjust an existing portfolio

After analyzing an existing portfolio, you can use the site’s tools to help you understand the possible benefits of any adjustments you may be considering. You can play a variety of “what-if” scenarios to understand how a particular move may improve the level of diversification in your portfolio. Before making adjustments,  always do your homework on each individual security first.  The tools on this site are all based around past performance. So due diligence is necessary to understand the future prospects of a particular stock or fund.

• Correlation Analysis – use this tool to understand how a particular asset is correlated with other assets in your portfolio.  If you are considering adding a new asset to your portfolio, run the Correlation Analysis on the portfolio with it included.  After doing so, you will be able to answer the question, “Does adding (or removing) this asset improve the level of diversification of my portfolio?” 
• Efficient Frontier– the efficient frontier determines what would have been the optimum weighting of the assets in your portfolio for a past time period.  You can use this tool to give you some guidance on shifting asset weights in your portfolio.  A word of warning: do not take the optimum weights literally.  The optimum weights can sometimes be extreme (such as short-selling, which involves additional risks).  Instead, look at the results as guidance on what would have been optimal in the past, and use that guidance in considering your future strategies.  If you are considering adding a new asset to your portfolio, run the efficient frontier tool on your portfolio with it included.  Based on its past behavior, does it look like it will add value in improving the return and reducing risk? 
• Always do your homework on an individual asset’s fundamentals and future prospects before making decisions to add or remove it.  Sites such as Morningstar and Yahoo finance provide excellent tools for doing so.
• Sharpe Allocator – use this tool to gain a different perspective on your portfolio allocation and compare it to the results of the Efficient Frontier.  Use this tool as another source when considering adjustments to the portfolio.  Compare its results to those of the efficient frontier.  Again, do not take the suggested optimal weights literally.  Instead, look at the results as guidance on what would have worked well in the past. 
• Save your adjusted portfolio to My Portfolios and track its performance over time.  You can adjust the asset weights to exactly match your actual portfolio’s weights.  If you save it as a separate portfolio, you can compare its performance over time to that of the original portfolio.    You can compare the performance of your portfolio against that recommended by the Efficient Frontier or Sharpe Allocator. 
• Enter your portfolio in the site’s portfolio competition if you would like to match your portfolio’s performance against those of others.

Analyze/build a new portfolio

In many ways, it is easier to start from a blank slate rather than having to make adjustments to an existing portfolio.  If you are starting out building a new portfolio, this site offers lots of resources to help you model something that will work for you.  And even if you are holding an existing portfolio, you may choose to build a new portfolio on this site that does not reflect your current portfolio at all, so that you can model a preferred portfolio without being concerned about your current holdings.  In either case, it is instructive to build a portfolio and analyze it using InvestorCraft’s tools.

• The first step is to do your homework on the individual assets or asset classes you are considering.  Make a list of assets (stocks, ETFs or mutual funds) in which you are interested.  Do your homework on each one, using sites  as Morningstar and Yahoo finance.  Narrow down the list to a group that you would like to be considered as core holdings.
• Now, take that list of assets and run the Correlation Analysis on it.  This will help you understand if the assets offer a significant degree of diversification or are too much alike.  Beware of having too many assets with high correlation factors.  It is acceptable to have a few, especially if you like their future prospects.  Try different combinations of assets you are considering.
• Next, take the assets resulting from the Correlation Analysis and run them through the Efficient Frontier.  This tool will give you guidance on the proportions of each asset in your portfolio.  If you are considering 5 assets, is it best to allocate them at 20% each, or does something else make sense?  The Efficient Frontier suggests a theoretical optimum based on past behavior.  Don’t take the results of the Efficient Frontier too literally.  Take into account the results of your research on each individual asset at this stage.
• Next, run the assets through the Sharpe Allocator.  This will offer a different set of results from asset weights.  Compare them to the Efficient Frontier. 
• Once you have a portfolio, save it to My Portfolios.  The resulting asset weights suggested by the Efficient Frontier or Sharpe Allocator will be saved.  You can adjust them manually later if your actual portfolio’s weights are different.  This will allow you to track the portfolio’s performance over time.
• Enter your portfolio in the site’s portfolio competition if you would like to match your portfolio’s performance against those of others.

Communicate with other investors

The InvestorCraft forum offers a community meeting place for investors to learn from each other.  This is where investors with similar or diverging interests, opinions and backgrounds can meet and post questions, information and ideas.  It’s all about information sharing and exchange.  Use the forum to learn from others, and also please share your knowledge and experiences.

Education/fun

One of the best ways to use this site is for education and fun.  The site has a wealth of tools and resources to help build your knowledge, and it is a great way to learn about concepts in portfolio management.  You do not have to have an actual real-world portfolio to do so.  Build a fictitious portfolio and track its performance over time.  Play what-if scenarios on it to understand how certain assets add or subtract value from the overall portfolio.  Enter the portfolio in the site’s Portfolio Competition to match wits against others.  All these things will serve to increase your knowledge of investing over time and better position you when and if you do want to make real-world investing decisions.