Morningstar's Instant Portfolio X-ray Review

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MorningStar has a nifty tool called Instant Portfolio X-Ray. It analyzes your stock portfolio, and returns eight different comparisons based on your holdings and total portfolio value. This stock tool helps you visualize your holdings better, so you can tweak your investments to your liking.

First, you enter your portfolio holdings, along with the value of each holding. If you have cash sitting in your brokerage account, you may add cash holdings as well. Once you enter the required information, the X-ray will return 8 values:

Asset Allocation

A pie chart classifies your holdings based on asset type: cash, bonds, US stocks, Foreign stocks, etc. Your asset allocation should reflect your age and level of risk aversion, which is all part of your personal investment plan.

My asset allocation is aggressive growth because my time horizon until retirement is at least 35 years. My current allocation is as follows:

  • 75% US Stocks
  • 20% Foreign Stocks
  • 5% High Yield Online Savings Accounts

My focus is on small and mid cap stocks because that’s where I’ll earn the best gains. I also own a few shares of Microsoft (MSFT) and Gap Inc (GPS). as pure value plays, but stocks like ROIA, CLDN, and EFJI will hopefully be my biggest winners. (View all the stocks in my portfolio.)

Stock Style Diversification

You can view your holdings based on valuation and interest rate sensitivity. I look for small and mid cap growth stocks that have wide moats and large growth opportunities. As for large caps, I believe in buying value stocks, beaten stocks that are currently out of favor. At the end of the day, well run companies will emerge from the wreckage no matter what.

Stocks by Sector

Instant X-ray returns a very simple breakdown of your holdings by sector. MorningStar also provides the sector diversification for the S&P 500, which gives us a nice benchmark to compare our holdings to.

What will be the hot sectors in 2007? I think tech stocks are the place to be. Banking stocks should perform well since many international banks are growing along with their economies. As for US banks, foreign investments will provide growth opportunities, especially in emerging markets.

Stock Type

Whether you invest in cyclical or classic growth stocks, this tool will classify your investment as a specific type. My portfolio currently lacks a high paying dividend stock, so I’m looking for some ideas. Right now, Bank of America (BAC) is my highest yielding stock at around 4.2%.

What’s your highest paying dividend stock?

Fees and Expenses

Knowing how management fees and expense ratios will effect your returns is as important as finding the right mutual fund. I have gotten pretty familiar with Kiplinger’s Fund Tool lately when analyzing my Fidelity Freedom 2050 Fund. This fund will do for now, but I plan to buy into another fund by the end of 2007. I think the Freedom Funds are too conservative, and I’m a risk taker!

World Regions

The map feature gives you a nice visualization of your global investments. My largest global holdings are Barclay’s (BCS) and Tata Motors (TTM), and I want to buy into Home Inns & Hotels Management (HMIN) very soon.

Since you’re reading a global investment blog, I’m not going to emphasize the importance of both domestic and international investments. You’re reading this blog because you understand the significance of global investing. Years ago, the United States dominated the equities markets, but things have changed for the better. Finally, more economies are experiencing well deserved wealth and growth. BRIC (Brazil, Russia, India, and China) are no longer emerging markets; they are powerful global markets that have tons of room to grow.

The real question is which market will perform better in 2007? Give your two cents by answering our poll.

Stock Stats

This cool tool returns your portfolio’s return on investments, price valuations, projected 5 year growth, and average yield per holding. The two important values are return on equity, and for me personally, projected 5 year growth. I invest in stocks with 15%+ return on equity ratios, unless I see something particularly special in the stock. eBay fails to meet the requirement, but I really like their business model.

Growth is also an important factor in my investing philosophy. I want to grow with 21st century businesses just as investors grew with Microsoft, Coca Cola, and GE. Whoever bought into any of those IPOs is very, very well off.

Top 10 Holdings

Here’s a great way to challenge your investing skills. If you watch Cramer’s Mad money, then you know about “Am I diversified?” This is a great game to play with your own portfolio. Simply list your top 5 holdings, and ask yourself, “Are my top 5 holdings well diversified?” Sure, you can’t play with Cramer, but you’ll learn a thing or two about your portfolio. If you hold any stocks in overlapping sectors, choose the stronger company and ditch the other.

Jim Cramer teaches us investors important lessons. We can all learn a thing or two from his musings.

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