Portfolio stress test
Discussion
Apollo Zensen said:
Hello, anyone got any recommendations for (hopefully free) portfolio stress testing tools for a DIY investor? Only really needs to be simple e.g. if S&P500 down 20% my portfolio estimated down x%
I'd be very careful looking at things that way - consider the recent unpleasantness - the S&P is essentially flat relative to the pre-CV high, but that disguises great performance by some large cap tech stocks, and really rather poor figures for much of the rest of the index.The more your portfolio diverges from a S&P tracker, the greater the likelihood that you could have seen a significant change (+ve or -ve) in value from what at the surface is a ~0% change in the SP500.
Edited by xeny on Tuesday 29th September 21:04
Sounds to me like the OP just wants to be able to enter his holdings (probably funds) into a tool and then run a simulation of the DOW falling 20% where the tool will ascertain what elements of what holdings are in the DOW and will show him the effect on the value of his portfolio.
I could be wrong....
I could be wrong....
OddCat said:
Sounds to me like the OP just wants to be able to enter his holdings (probably funds) into a tool and then run a simulation of the DOW falling 20% where the tool will ascertain what elements of what holdings are in the DOW and will show him the effect on the value of his portfolio.
I could be wrong....
That’s how I read it, but unless the portfolio is purely index trackers, I don’t see it working like that. I could be wrong....
Example: FTSE as of last night was 23% down on its 2020 high, Shell, Lloyds and BP are in your portfolio and they’re FTSE100 listed, so they’ll be down 23%...? Nope, all 3 are down by more than 50%.
Maybe the simplest and crudest method would be to put the holdings into something like Yahoo Finance and then pull up its historical chart along with the main global indices and see where your portfolio diverged from those back in time. I suspect that is all a basic stress testing product would be doing.
OP - Not quite clear about your question. Are you seeking to find a simple way to monitor the progress of your portfolio ?
I have used the same monitoring system for years, and am always aware of the current overall performance. Only requires 10 minutes to complete an end of week valuation.
I spotted Yorkshire, but your ref. to S&P presumably means you are mostly holding US shares.
Edited by Jon39 on Thursday 1st October 17:04
anonymous said:
[redacted]
Indeed you must factor all these elements, but those factors have nothing to do with the OP question in my eyes. . . . . the BIG problem facing us all is working out when we don't need any money and how much to leave behind untouched and unused by our formidable performing portfoliosYou can never get that timing right. 
Just accumulate as much as possible for as long as possible and target to leave as big a pile as possible without any of those factors impingining on your day to day life and what you want to do. Simples.
In the grand scheme of things, the person who wants to time it perfectly tends to be a spender not a saver anyway and so rather than worry about how to time running out of money perfectly, it’s arguably better to spend that time getting one’s mind pre adjusted for spending 20 years in an NHS wingback soaked in third party urine while being shouted at by cheap, imported labour.
Currently in retirement are the wealthiest humans to have ever lived, with the biggest pensions and we can see quite clearly that huge numbers of them are living far longer than they ever expected and without enough money to keep warm and dry. The mere existence of ‘equity release’ warns us all that we need to save more than we think, earlier than we want as few will have the lixury of dropping dead early.
Just accumulate as much as possible for as long as possible and target to leave as big a pile as possible without any of those factors impingining on your day to day life and what you want to do. Simples.
In the grand scheme of things, the person who wants to time it perfectly tends to be a spender not a saver anyway and so rather than worry about how to time running out of money perfectly, it’s arguably better to spend that time getting one’s mind pre adjusted for spending 20 years in an NHS wingback soaked in third party urine while being shouted at by cheap, imported labour.
Currently in retirement are the wealthiest humans to have ever lived, with the biggest pensions and we can see quite clearly that huge numbers of them are living far longer than they ever expected and without enough money to keep warm and dry. The mere existence of ‘equity release’ warns us all that we need to save more than we think, earlier than we want as few will have the lixury of dropping dead early.
DonkeyApple said:
You can never get that timing right.
In the grand scheme of things, the person who wants to time it perfectly tends to be a spender not a saver .......
In the grand scheme of things, the person who wants to time it perfectly tends to be a spender not a saver .......
Interesting. I have never even considered that correlation. Has someone made a comparison study between people who do
long-term investing and those who do short-term trading (gamblers)?
However, I do fit the pattern. Maybe a very occasional sports car treat, but a two year old as new at 40% under list, and even that then becomes a long-term keeper.
DonkeyApple said:
You can never get that timing right.
Just accumulate as much as possible for as long as possible and target to leave as big a pile as possible without any of those factors impingining on your day to day life and what you want to do. Simples.
In the grand scheme of things, the person who wants to time it perfectly tends to be a spender not a saver anyway and so rather than worry about how to time running out of money perfectly, it’s arguably better to spend that time getting one’s mind pre adjusted for spending 20 years in an NHS wingback soaked in third party urine while being shouted at by cheap, imported labour.
Currently in retirement are the wealthiest humans to have ever lived, with the biggest pensions and we can see quite clearly that huge numbers of them are living far longer than they ever expected and without enough money to keep warm and dry. The mere existence of ‘equity release’ warns us all that we need to save more than we think, earlier than we want as few will have the lixury of dropping dead early.
Still a tricky one to "know"....speaking as someone planning an escape from reasonably paid work in the foreseeable future....Just accumulate as much as possible for as long as possible and target to leave as big a pile as possible without any of those factors impingining on your day to day life and what you want to do. Simples.
In the grand scheme of things, the person who wants to time it perfectly tends to be a spender not a saver anyway and so rather than worry about how to time running out of money perfectly, it’s arguably better to spend that time getting one’s mind pre adjusted for spending 20 years in an NHS wingback soaked in third party urine while being shouted at by cheap, imported labour.
Currently in retirement are the wealthiest humans to have ever lived, with the biggest pensions and we can see quite clearly that huge numbers of them are living far longer than they ever expected and without enough money to keep warm and dry. The mere existence of ‘equity release’ warns us all that we need to save more than we think, earlier than we want as few will have the lixury of dropping dead early.
I think your suggestion of tracking with yahoo is reasonable, although I suspect the OP wants some kind of "portfolio x-ray": I've heard much of these, but assume it is the domain of financial advisors, large firms, perhaps folk using Timeline or similar - not seen any for us amateurs ;-)
One thing we *do* know is that health rarely improves with age, and there is always the looming grey wedge of death
mikeiow said:
Still a tricky one to "know"....speaking as someone planning an escape from reasonably paid work in the foreseeable future....
I think your suggestion of tracking with yahoo is reasonable, although I suspect the OP wants some kind of "portfolio x-ray": I've heard much of these, but assume it is the domain of financial advisors, large firms, perhaps folk using Timeline or similar - not seen any for us amateurs ;-)
One thing we *do* know is that health rarely improves with age, and there is always the looming grey wedge of death
Interactive investor do portfolio x-rays but it doesn’t break down in to FTSE, S&P, DJIA etc.I think your suggestion of tracking with yahoo is reasonable, although I suspect the OP wants some kind of "portfolio x-ray": I've heard much of these, but assume it is the domain of financial advisors, large firms, perhaps folk using Timeline or similar - not seen any for us amateurs ;-)
One thing we *do* know is that health rarely improves with age, and there is always the looming grey wedge of death
It will show holding overlaps between individual stocks held and large holdings in funds which is quite useful though.
mikeiow said:
Still a tricky one to "know"....speaking as someone planning an escape from reasonably paid work in the foreseeable future....
I think your suggestion of tracking with yahoo is reasonable, although I suspect the OP wants some kind of "portfolio x-ray": I've heard much of these, but assume it is the domain of financial advisors, large firms, perhaps folk using Timeline or similar - not seen any for us amateurs ;-)
One thing we *do* know is that health rarely improves with age, and there is always the looming grey wedge of death
Yup. The diff Utley is that once you’ve calculated the events that each of your holdings will respond to and how they will respond, you then need to guess what the event will be and then what the global governments’ reactions will be. I think your suggestion of tracking with yahoo is reasonable, although I suspect the OP wants some kind of "portfolio x-ray": I've heard much of these, but assume it is the domain of financial advisors, large firms, perhaps folk using Timeline or similar - not seen any for us amateurs ;-)
One thing we *do* know is that health rarely improves with age, and there is always the looming grey wedge of death
To all intents and purposes that’s impossible.
If your holdings align to an index or if they don’t align can be worked out. To be honest it can be seen pretty quickly.
I’ve always agreed with Derek Ch’s approach that it’s better to underestimate and to just bang in enough money every month into stuff that correlates well to global markets so as to be as confident as possible that your pot will be large enough at the end or survive and thrive from short and medium term events.
We just need to be more proactive than in previous decades because the rates of change in the market tend to be faster.
Ultimately if someone is investing in esoteric stuff like crypto or small companies then there is not much stress testing that can be done other than considering you could lose the lot overnight. At least with the boring stuff not only do you get the correlation to the market but you’re in the same sinking boat as everyone else when something strikes and are most likely to be on the side of government intervention etc.
Simpo Two said:
DonkeyApple said:
Just accumulate as much as possible for as long as possible and target to leave as big a pile as possible
I like it. Simple is good. But it means you'd have to drive a 1986 Ford Fiesta because anything costing more than £200 would detract from the objective!The hard reality is that if you’re down at the £200 car end then you’re unlikely to have any excess income to save and are reliant on the State pension and NHS housing so this sort of stuff doesn’t really matter in the same way.
So in reality, I’m car terms the sprectrum is probably starting at something that can be leased for £100/month all the way up to buying whatever you want, whenever you want.
Likewise with property. It’s not about living in a caravan with some dags but about recognising the long term impact of the amount you decide to commit to paying a mortgage for 20 years and the trade offs etc.
It might be fair to argue that many people leasing expensive cars where the monthly is a very significant portion of their takehome might be doing so at the expense of investing that money into ensuring they have an income available when they get laid off at 54 and never get another proper job again but live to be 85. 30 years of having to self fund an income or 30 years standing at the entrance of B&Q welcoming people.
People are right to consider the unknown future but typically very wrong in the common assumption that they will die early. Humans are the real cockroaches that won’t die and now the NHS is hellbent I’m keeping humans alive even longer.
If you work on the statistical fact that you’ll live much longer than you generally expect and combine that with the statistical fact that you’ll become unemployable before you plan to stop work then it becomes clear that banging whatever you can into a pension plan as soon as possible is all rather sensible.
DonkeyApple said:
....combine that with the statistical fact that you’ll become unemployable before you plan to stop work then it becomes clear that banging whatever you can into a pension plan as soon as possible is all rather sensible.
Yes, that's a point that's often overlooked. For many people retirement is what happens when they're over 50 and lose their job. It's known as "unexpected retirement"! Despite all the anti-age discrimination laws the plain fact is the job market's tough for most older people.As regards portfolio stress testing, it's easy to try to "over think" the world of investment. Everything is based on projections into the future which are, by definition, uncertain. Do the basics, diversify, use the tax shelters and hold tight for the ride.
Apollo Zensen said:
Thanks for all the replies. I was looking at stress testing as an alternative / complement to volatility for measuring the risk of a total portfolio (i.e. including cash / bonds etc). Looks like I will need to knock up a spreadsheet!
Knock up a crystal ball too, who would have thought cv19 would arrive and the good old USA stock indices would be where they are currently?Gassing Station | Finance | Top of Page | What's New | My Stuff