Finishing out your home is a big part of the building process. Setting up electrical outlets, plumbing, heating, flooring and other details will, in many ways, determine how enjoyable it is to live there. Your structure may be sound; your plans perfect; your layout exactly suited to your needs; but if there aren’t enough outlets in the kitchen, or the cable connections are in the wrong place, you’re not going to be happy.
In the same way, investment reporting establishes the way that you interact with your portfolio. Some people want as much detail as possible—individual asset data, updated monthly. Others just want to see a broad overview, perhaps annually or quarterly. Most people want something in between. But everyone wants some type of presentation of where they are and what has happened.
There are essentially three types of reports: position reports, activity reports, and performance reports. Position reports tell you where you are. There is usually some kind of asset-allocation overview, along with a listing of individual assets. The way assets are listed is important—how items are presented frequently will determine what we see. The best layout is by economic sector, with some consideration of you position’s size. That way you can quickly see how diversified or concentrated your portfolio is.
Next is activity—buys and sells, and payments or stock splits. It’s important to know what’s happening with your investments. Unfortunately, this is where many systems get bogged down. There’s too much detail and users get overwhelmed. A simple overview usually suffices. Finally, there is performance reporting. Again, there are many choices, but a simple time-weighted presentation of portfolio performance—with perhaps a breakout for stocks, bonds, and cash—is usually enough. It’s often the case that less is more—simple well-designed reports are better than lengthy tomes filled with mind-numbing detail.
Reporting may seem like a minor detail, until you have to deal with a poorly designed and executed system. But details matter. Getting them right can make all the difference.
Douglas R. Tengdin, CFA
Chief Investment Officer