Basics 02: The tracker tool I built and am using

Dear Readers,

Thank you for coming here.

This is going to be the second post in the "Basics" series. And I am going to introduce the tracker tool I built and has been using to track both of our net-worth and investment portfolio.


Brief introduction to the tool

First, the tool is google sheet based. Why google sheet?

I guess it was mainly because I had not really used google sheet when I started to build this tool and wanted to give it a try, and liked the feature that I could access the tool anywhere on any platform.

If I could choose again, I would probably choose Excel. You can also access Excel anywhere on any platform by saving the file in Google Drive, provided you have the software installed. Furthermore, it has become a pain not being able to use table and some graph features, like having two vertical axis in a chart with common 0 on the horizontal axis, in Google sheet.

Can I convert my tool to excel? Absolutely! And I guess it wont take too much efforts. I am just too lazy to do that.


Second, the tool consists of mainly 5 tabs split into 3 levels, with lower levels being the input for higher-levels:

1. Top-level: a summary sheet with graphs and necessary numeric values to show the evolution of our net-worth and investment performance against time, on a monthly basis, because I update the next level, which is the input for this sheet, once a month, towards the end of each month.
2. Middle-level: two sheets to track our latest net-worth (See Basics 01 for how we calculate our net-worth) and investment portfolio and performance respectively, updated once a month, towards the end of each month. These sheets also include graphs to show certain information, such as split of net-worth, emergency fund status, the performance for each counter etc
3. Lowest-level: two transaction-level sheets tracking my buy/sell transactions in the market and dividend respectively, updated as and when each transaction happens. These sheets include high-level sanity check to ensure that model is working properly and also include graphs to track transactions, such as number and value of transactions each month, dividend per month/year etc. If you are wondering why I did not combine these two sheets into one, i.e having one sheet tracking both buy/sell and dividend transactions, you are absolutely right. I would prefer that as well. However, the tool was built that way and again I am too lazy to change it.

Why did I build my own tool, instead of using something in the market? 

I spent at least 20 hours, probably many more, building and improving the tool. The tool has undergone 2 major evolution since created.

So why did I choose to spend so much effort to build something that may not even work because I could not even score well for Finance in School and never had any experience in that domain? Why didn't I just pick a software or app built by Pros?

Well, I guess it came down to below 4 reasons.


First, I really had a lot of time to kill. 

My work at that time was really good. I can spend 2-3 hours each day to complete the work and I can use the rest of the working time to build the tool. I know it may sound too good to be true, even more so if I tell you that it actually pays really well with superb benefits.

I got a bit too free and needed something to fill my time. It eventually led me to quit in face of a missed promotion. And then I screwed up. And now my last day on this job is end of the month and I have not found my next job yet. This experience not only ruined my holiday season, but also may haunt me for a much longer duration.  Now I could not help thinking how good it would be if I had just stayed in the job and relaxed. But anyway, life has to go on. I guess that job is not meant for me after all.


Second, I wanted to understand everything.

The options in the market present results in beautiful graphs and different aspects with little-to-no efforts, and I am sure that the results would be correct and according to finance best practices. However, I do not seem to understand some of the explanations. For example, XIRR gives you the return assuming all dividends are reinvested immediately with the same return. What does that mean? I know my dividend is not immediately reinvested. Does this formula still apply to me?

If I build my own tool, I can be sure (almost) that I understand everything about it. My solution to derive a time-weighted annual return is to calculate the weighted average of the time in the market of my portfolio on the transaction level and use the "root" calculation to derive the annualized return.

Well, is my solution more "correct" or "accurate" than XIRR? Is it more resource-efficient? I do not know. Even if it is, would that make a difference in the grand scheme of things? I do not think so. Is it worth the efforts? Well, as I said, I had too much free time to kill.


Third, it is about the actual exchange rate and the actual timing of transactions.

I wanted to use the actual exchange rate incurred on my money when I bought or sold. The options in the market do not seem to support that or at least do not explain explicitly that they do. And often, it is hard to verify what exchange rate they used to derive the results shown to me.

So I built my tool in such a way that the exchange rate is an output to be calculated based on actual money in and actual money out, instead of an input as most tools do. 

Similarly, I wanted to record the actual timing (I mean date) of receiving the dividends. The options in the market are able to track the dividend pay-out date. However, due to the broker or bank, I may receive the dividend a bit later. So my tool enables me to track the actual date and actual amount in the currency I want based on the bank transaction record, so that I am able to track both the actual timing and the actual exchange rate.

Again, is this necessary or even useful in the grand scheme of things? Probably not. Again, I was too free.


Fourth, I kind of enjoy updating the tool. 

In the process of updating, I pick up details to help explain the changes in the high-level results. And so far at least, I still have the time to do it. If my next job makes me so occupied that I am not able to update the tool monthly or start to feel updating it a drag, I may ditch it for something requiring less work.

Additions on Feb 01 2020

I am now inclined to advise you, my readers, to build your own template if you can. 

I was reading a book about building a template to track your network and the author emphasizes that the key to effective relationship management is to keep using it. 

And it just came to me that I had given up on many things that require long term commitment to show impact. However, I have never missed one update for this template. I believe a big reason is that I built this tool and I am committed to keeping using it. 


In summary, I will continue to use the tool for now as it gives me a (maybe false) feeling of being in control and being more accurate. 



This turns out to be a much longer post than I intended. If you have any questions or wish to understand more about the tool or wish to get a free copy of the tool, leave a comment below. I will be sure to respond as soon as I can.


Till next time!