Portfolio Charts Is Going Global


I remember my mom used to say that she knew that my brother was up to something not when he was loud, but when he was silent.  I guess somewhere along the line I must have picked up that family characteristic, as my recent bout of less-frequent posting has been masking a crazy amount of activity behind the scenes.

Ever since I first launched Portfolio Charts I’ve been critically aware of the distinctive United States focus of the site and, to be honest, of most investing discussions in general.   The single most common request I’ve received is to add tools for investors around the world, and considering the glaring hole in international investing data out there I totally understand the desire.  But that absence of data is both an opportunity and a roadblock, and making good on my goal to be more than just a US resource has been a daunting task.

Well I’m pretty persistent when I set my mind to something, and I’ve been completely immersed in this project for the last few months.  New data sources, entire new fund models, portfolio updates, asset juggling, calculator modifications — it seems that every time I thought I had it all figured out I found a new project that opened up.  Today I’m happy to announce that the long hours have finally paid off, and I’m really excited to share the results.

Bring out your loonies and shake your pounds — Portfolio Charts is going global!

Beginning today, I’m starting a rollout of new content focused on expanding the site beyond US exchanges.  It’s not going to happen all at once, but a long international journey begins with a single step.  And this first step is a big one, as it affects every section of the site.  We’ve got a lot to cover, so let’s start with the funnest part first — the calculators.  Here’s a screenshot of the new Heat Map.

PC-World Example

The chart works the exact same way as before, but there’s now an option in the Asset Allocation toolbar to select a country.  To get things rolling, I’ve populated everything I have for Australia, Canada, Germany, the United Kingdom, and the United States.  More countries and asset options will come over time as I accumulate more data, but I figure this is a great place to start.

Here’s the cool part — selecting the country converts the calculator to run as if it was designed specifically for that home country.  So when it is set to the UK, domestic stocks are UK stocks, bonds are based on gilt funds, returns are expressed in British Pounds, cash is based on UK interest rates, and all numbers are adjusted for UK inflation.  It’s a true UK calculator for UK investors.

Long time Portfolio Charts users will also notice a few changes in the assets, as I needed to rethink not only the asset options but also my terminology to make the calculators translate well between countries.  For example, “Total Stock Market” is actually kinda funny in retrospect for how US-centric it sounds, and the new name “Total Domestic Market” is much more appropriate.  Also, I’ve swapped Small exUS and Value exUS out for the more universal regional options World and North America.  That said, I hope to reintroduce them in the future — it’s an ongoing process and this is just a next step.  And finally, offering five different types of intermediate term bonds was admittedly overkill and not only made data collection impractical but also limited how certain portfolios translate between countries. Whittling down to four bond options along the government treasury maturity spectrum made things a whole lot easier not only to model but also to understand, and those four options should stand in reasonably well for any high-grade bond alternative.

Speaking of modeling, there’s also some fancy new data action going on behind the scenes.  The thing that pushed me over the edge to making this happen was finally figuring out how to accurately model real-world historical bond index funds purely from interest rates.  And we’re not talking about simple constant-maturity models, but realistic models based on Bloomberg Barclays index construction methodology and government-provided full yield curves.  That bit of work will require its own full explanation later, but for now I’ll simply offer a few samples of how they match up to known indices.

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As you can see, they’re a pretty darn good match.  I think one of the things I’ve personally learned the most about since I first launched Portfolio Charts is not simply how portfolios work but also how index funds work.

Building on that new knowledge, the last big change is something not immediately obvious but still very important — I’ve completely rebuilt the returns database from scratch.  There are still a few Simba references in there, but now the vast majority of the data is my own work or is gleaned from clean academic and government sources.  I feel like it’s an important next step in the growth of Portfolio Charts, as it helps make the methodologies consistent across time, the models consistent across countries, and the site just a bit more buttoned up as a whole.  The most tangible effect is that far less data now triggers the “estimated” tag in the calculators, as consolidating sources to fund-neutral numbers greatly reduces tracking error caused simply by differences in fund methodologies.

As you can imagine, such large changes in assets and data sources affects much more than simply the calculators.  The portfolios required several updates to the asset abbreviations and occasionally the portfolios themselves.  For example, the Merriman Ultimate has been removed for now as I’ve temporarily pared back on several of his favored international assets, and the Larry and 7Twelve portfolios have been modified a bit based on available asset options.  There are also a few more small tweaks here and there in anticipation of offering some global versions of specific portfolios, but nothing that violates the original design intent of any portfolio author.  For now the Portfolio pages data will remain in US form while I figure out how to grow from there, but you can model international versions all day long with the calculators.

The assets section is also getting an overhaul, but that one will take a bit of time to do right.  So if you’re a new visitor to the site from outside the US, please don’t take the continued US-focus in the Asset descriptions and fund options as a sign of neglect.  This is an ongoing project, and I need your help!  I’d love to list appropriate index fund options on foreign exchanges, so if you enjoy the new tools please consider giving back by taking the time to send me a few recommendations.

But enough with the technical stuff.  The real end goal to all this work is to study portfolios in different countries.  For example, have you ever wondered how the All Seasons Portfolio withdrawal rates translate across borders?  Now you can find out!

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The many calculators on the site all have the new functionality, so be sure to take them for a spin.  Even if you’re solely a US investor, studying how different portfolio concepts have worked in different markets can teach you a lot about the robustness of the underlying portfolio theory.  Some favorites may simply look nice after the fact based on a narrow view of US history but may not hold up in a different situation.  And others may surprise you with how resilient they are even in extreme economic situations around the world.

Before I send you off to play with all of the new tools, I have two favors to ask.  First, whether you spot a bug, have a recommendation for an improvement, or simply want to let me know I’m on the right track, please don’t be afraid to provide feedback.   And second, please take a moment to spread the word far and wide.  The new tools mean that the market for this information just got a whole lot bigger, and I could use a hand getting the word out.

Overall, I think the transition of Portfolio Charts to a truly global site is an exciting next step in my goal to help spread simple but sophisticated asset allocation concepts to everyday people just like you and me.  It has required a lot of work and there’s still a lot more to do, but my hope is that you find the information useful.