I was unceremoniously thrust into the ‘real world’ after graduating university. One of the things I now had to deal with now was the dilemma of saving money. I wanted a financial plan that was simple. Something I would not have to frequently monitor but would still provide an above-average rate of return. I settled on mutual funds.
Because I am with RBC, I had a variety of funds to choose from. At the same time, I started learning Tableau, a powerful data visualization tool. One of the advantages to Tableau was that it was able to integrate with R, a statistical programming language I had tonnes of experience with. To simplify the decision of investing (and improve my skillset in the process), I created an interactive dashboard in Tableau.
You can view & download the dashboard here: http://bit.ly/rbcfunds
I searched the most common financial platforms (Quandl, Bloomberg etc.) but was not able to find a method to download the performance of a mutual fund. The biggest reason was that RBC’s mutual funds are not traded on the TSX. In the future, however, I plan on diversifying into ETFs (Exchange Traded Funds). For now, I resorted to copying and pasting data from www.rbcroyalbank.com into Excel.
Two important statistics I used to measure performance are standard deviation and Sharpe ratio. Standard deviation quantifies risk – or how much the return fluctuates around its overall average. Sharpe ratio is a bit tricky. It represents the excess return ‘rewarded’ for enduring an unit of risk, or one standard deviation.
Other measures I incorporated into my dashboard are AUM (Assets under management) and the fund’s date of inception.
After compiling the spreadsheet in Excel, I used Tableau to visualize the data. The hardest part here was designing the filters so that isolating one row, point, etc. will filter all other graphs. Future steps and improvements I can make is to consolidate funds from other large banks.
I would stay away from Mutual Funds. The MER on those funds are around 2%. When your portfolio reaches $500,000 you will be paying the equivalent of a new car every few years in management fees.
Have a look at ETF’s they have lower management fees and are easily bought and sold on the TSE.