“Snapchat”® for portfolio reporting

September 30, 2014 Categories: The Art of Advising
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In today’s world, it’s likely that you (and any teenage children you might have) are a social media user. One of the newest social channels around is Snapchat. The photo-sharing mobile app is fun, easy and − like most social media − moderately addictive.

A Snapchat user takes a picture (or maybe a “selfie”) on their smart phone and then shares it with friends for a “snap” – 10 seconds or so. In that short burst of time, you have shared where you are in space and time – on vacation with the ocean in the background, hiking in the mountains, sitting at your computer working. The app is appealing in its simple approach to communicating a message.

What if you could do the same for a client’s portfolio – summarize it in a simple, communicative picture?

Consider your typical moderately risk-averse client’s allocation. Those allocations might include asset classes like U.S. large cap equity, international equity and fixed income, as well as smaller allocations to diversifying asset classes like emerging markets, real estate, commodities and small cap U.S. equities.

However, what your clients see and hear in the media is likely all about the top-performing asset classes. Think back to 2013 when small cap equity returns were shooting off the charts, yet bond fund returns were relatively low. Clients naturally wanted to know why their diversified portfolios were not keeping up with small cap equity.

What if you could have shown that client a graph like the one below – one that communicates what their total portfolio looks like in one quick picture?

One-Year returns

Each circle represents a fund in the client’s portfolio, the color of the circle represents the asset class, and the size represents the allocations or weighting in the portfolio. The triangle inside each circle is the one-year return of the fund. The blue star represents the total return for the client’s portfolio. For illustrative purposes only.

Technically speaking, this is a picture of the weighted-total return of a portfolio for one year. But for your clients, it can serve as a simple, Snapchat-style representation of a moment in time − clearly depicting the relative risk of each asset class and the amount allocated.

The bottom line

For your clients, a picture like this can capture the sum total of their portfolio. You can build a helpful context-setting conversation around such a simple image that helps emphasize the benefits of a long term, well-diversified portfolio.

Snapchat is a registered trademark of Snapchat, Inc.

Standard deviation is a statistical measure of the degree to which an individual value in a probability distribution tends to vary from the mean of the distribution. The greater the degree of dispersion, the greater the risk.

Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.

Diversification and strategic asset allocation do not assure profit or protect against loss in declining markets.

RFS 13596

  1. avatar
    Blaine Burnett
    May 27th, 2015 at 10:21 | #1

    I just re-read an article from 30Sep14 by Jill McEntee that mentioned the value of a graphic – a weighted bubble chart of a client’s total investments. Can you recommend any tools for generating a graphic like that?
    Thanks! — Blaine

  2. avatar
    Natalie Miller
    May 28th, 2015 at 09:26 | #2

    Thanks Blaine. Glad you find the representation useful.

    Any program that can create a ‘bubble’ chart (a version of a scatterplot) should be able to do it. We happened to use Microsoft Excel and Microsoft PowerPoint.

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