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This week, we interview Dirk Quayle, President of Business Logic - whose investing app, LikeAssets (lite version, premium version) allows investors to "find out their personal alpha and overall asset allocation by importing your brokerage accounts."
This week only: Like Assets and our SA Investing Tools crew are teaming up to offer new subscribers to LikeAssets a 30% discount for the next three months. Use coupon code la30off when signing up.
And now, the interview:
The first thing LikeAssets asks me to do is input my brokerage account information, in order to automatically import my portfolio. I realize you're the vendor, but how do I know this is safe? Could a rogue LikeAssets employee use this information to hack my portfolio and place trades?
Business Logic, the company that owns LikeAssets, has been working with large financial institutions for 15 years, providing secure access to personal financial data. Your brokerage account credentials are encrypted in a non-human-readable form so that employees cannot read them.
This did not apply to me, but I'm sure it applies to many other investors: How does LikeAssets handle accounts at multiple brokerage firms? How many brokerages do you support?
Currently, LikeAssets supports automatic account download from nine of the largest brokerage firms accounting for over 80% of brokerage assets. Additional brokerages are being added as we speak. We also support manual account entry for those with assets outside our supported brokerages.
Will LikeAssets include in my Return calculations trades I've already exited before beginning to use LikeAssets? If not, does it include trades I've exited since I started to use LikeAssets, or does it only account for open positions?
LikeAssets considers all trade history provided from the broker in the return calculation, including closed (exited) positions. In a release coming soon, LikeAssets will allow users to view returns of closed positions.
Once you've synced my portfolio using my brokerage account, does LikeAssets keep up with changes in my portfolio? If yes, how often are changes monitored in real-time?
LikeAssets downloads new trades from your brokerage firm every night, so you’ll always be up to date. We do not monitor your portfolio in real-time, however you can synchronize your accounts at any time.
Do you have the ability to monitor holdings such as forex and futures contracts? If yes, do you track my margin levels as well?
We do not currently support forex, futures or options, but we are always interested in adding features that make sense for our users.
Ok, so after LikeAssets knows my portfolio, the first thing it shows me is a chart that compares my portfolio's returns to a "custom benchmark." How is the custom benchmark calculated? Can I modify it?
LikeAssets creates a custom benchmark for every portfolio. The benchmark is built from the bottom up, based upon the assignment of the most appropriate benchmark for each security in that portfolio. It is a benchmark composed of like assets. It is the best definition of ‘the market’ for a given security.
The LikeAssets Benchmark is built using a combination of exchange-traded funds (ETFs) that match the asset allocation of the securities in your portfolio. This allows you to compare the performance of a portfolio to the performance of its like assets. It is a more personalized and meaningful benchmark than generic indexes, such as the S&P 500, since a portfolio may not be invested like the S&P 500. So if you have 50% in a TIPs fund, and 50% in emerging market equities, your benchmark will be 50% TIP index and 50% emerging market index. Right now the user can also compare to S&P 500, NASDAQ, and the Dow. In the future, we may provide additional standard benchmarks and modifiable benchmarks.
I understand how Like Assets calculates my "Alpha" - that would be whether I'm beating my chosen benchmark. And Return is simple - it's absolute. But what is Gain - which for me is flat?
The Alpha is calculated based on whether or not you are beating the LikeAssets chosen benchmark for the security you own. The percentage return and dollar gain includes dividends, while the gain is the dollar amount of the gain or loss relative to the purchase price.
When calculating the percentage return of a portfolio, LikeAssets considers all of the trades in the portfolio's history, including splits and dividends. LikeAssets uses the Modified Dietz method to calculate a money-weighted return.
The Asset Class breakdown is interesting - it shows me how my assets are spread out over numerous asset classes. In my sample, four-stock portfolio (AAPL, DD, GOOG, GE), it tells my that 3% of my assets are allocated to "Small Cap Value" - how so?
The LikeAssets Asset Class breakdown is constructed based on a security's behavior, rather than its market cap. So a stock that is a large conglomerate (like GE & DuPont) can, in fact, behave like a portfolio of large, mid-sized and small companies. In an extreme case, if the market thinks there are no synergies between the various business units then a large conglomerate could be priced as a portfolio of small cap firms.
LikeAssets offers me another way of viewing my holdings - by Industry. In the same, sample portfolio, it gives me the following: Basic Materials: 7%; Consumer Services: 10%; Industrials: 28%; Technology: 54%; How did it arrive at those numbers?
Industry allocation is determined by using a multi-factor Industry Style Analysis in conjunction with classifications from the North American Industry Classification System (NAICS). In your example, GOOG and AAPL provide exposure to the Technology industry, while GE and DD give exposure to Industrial, Basic Material and Consumer Services.
As always, Seeking Alpha users are looking for tools that give them actionable investment ideas. Give us an example of a time LikeAssets helped you, or a client, make a significant positive change to their portfolio, or hold back on a bad idea.
The tools provided by LikeAssets give investors a fresh perspective on their portfolio. One user noticed that they were 25% in cash after aggregating accounts from three brokerages. That was too high for them. Another investor thought they were getting a good return in their REIT investments, but found out the REIT index was doing better, and that caused them to consider other REIT options or a passive REIT index approach. A third investor realized their returns from funds within a particular fund family consistently underperformed their benchmark, causing them to look more closely at the fees and fund makeup.
What's next for LikeAssets?
We have a lot coming out, including help with asset allocation; improved tracking for realized and unrealized gains; help for finding lemons; better views into closed positions; more brokerages for downloading data; improved manual input and editing of positions/trades; weekly email alerts; wealth forecasting and much
Have any thoughts, suggestions, or comments for Dirk and his team? Tell them, and other SA readers, what you think in the comment stream.