We’ve all heard time and time again how understanding the value of your portfolio is so important.
But why — why does it actually matter?
And how the heck are you supposed to keep track of the value of your portfolio while also adding more and more assets to it, which is what you’re supposed to be doing to keep your diversification up to snuff?
We agree that portfolio value is an important metric, and that it’s only getting harder to understand. That’s why today we’re going to fill you in on everything you need to know about portfolio value, including what it means, why you should be tracking it, and how to monitor portfolio value using two different methods.
What Does Portfolio Value Mean?
A “portfolio” is just a big ol’ list of all the assets in your possession.
The definition of asset in this setting is pretty loose. Basically an asset is anything you can own, whether you possess it physically, or it’s an alternative investment asset that lives in the digital world, or you have a token that represents the asset.
That means assets can take many, many forms:
- Artwork
- Precious metals
- Digital currency
- ETFs
- Private equity
- Real estate
- Antiques
- Stocks and bonds
- NFTs
- Fiat currency
- Websites
- Vehicles
- Jewelry
- REITs
- Businesses
- Etc.
So that’s the portfolio part. Now for the value part of the equation.
While value means different things in different contexts, in this case “portfolio value” means the total monetary value of the assets held in your investment portfolio.
Finding your portfolio value involves first calculating the monetary value of each individual asset, then adding all of those values together. The number you get is your portfolio value. Creating a single number like this gives you something that’s easy to understand and track to make sure you're moving toward your goals.
Later, we’ll show you how to do this calculation the manual way as well as an easier, software-powered method. But first, let’s dig into that concept of financial goals.
Why Understanding Your Portfolio Valuation is Important
Ultimately, knowing the valuation of your portfolio is a lot like knowing your bank account balance. When you know what your portfolio is worth, you know what you can do with it. You know if you can liquidate assets to afford that big purchase, or if it’s not in the cards at the moment.
But that’s just the short-term upside. When you monitor portfolio value over time, you’ll start seeing patterns and understanding growth rate. This is where meeting those big financial goals comes into play.
Many investors will decide on a required rate of return — which is the return an asset must generate in order to stay in their portfolio. They do this because it creates more predictable growth when it comes to their portfolio value over time. Understanding the trajectory of your portfolio is key if you plan on using it to help you do something like retire from working in 15 years. When you know where your portfolio will be at any given time, because you’ve studied how its value grows, you can set financial goals with a lot more certainty.
In addition, keeping an eye on portfolio value means you’ll be quick to spot anything that isn’t quite right. These could be small things, like how fees from services you hardly use add up, as well as big things, like instances of identity theft.
Finding Portfolio Value the Manual Way
Calculating portfolio value manually isn’t all that hard (for most asset classes, anway) but it can be very time consuming.
The simple route is just finding and adding up the market value of every asset.
So, for example, say you have 100 shares of stock that are valued at $20 each. The market value for this asset is $2,000. And if one of your assets is a 401(k), your online account should be able to tell you what it’s worth on the day you want to find your portfolio value. For your most accurate number, try to account for any payouts such as dividends and also subtract as many known expenses as possible when finding value.
Now, repeat these steps of looking up accounts and doing some quick math until you’ve worked your way through every asset. Once you add up the market value or everything, you’ll have your portfolio value.
If you wanted to calculate the actual liquid, spending value of your portfolio, you would need to take out the taxes, fees, and penalties that would happen in a sale of your assets. This number is smaller but it’s more realistic as far as how much money you’d have to spend if you were to liquidate your portfolio today.
But now it’s time for the other shoe to drop. If you want to actually track your portfolio value to see how it’s changing and growing over time, you have to repeat all of the above steps every single time you want a fresh look at value.
Oh yeah, and then there’s crypto.
Thanks to absolutely wild market swings, it’s hard to truly understand how crypto aligns with the FIAT currency in which you purchased it. And that makes it difficult to understand the return on investment (ROI) and therefore the value of crypto holdings. This becomes even harder when you think about assets that are purchased using crypto, such as NFTs. Now they’re twice removed from the FIAT currency in which you measure the rest of your investments, meaning you get to spend twice as long converting their value into something that aligns with the rest of your portfolio.
And the worst part? By the time you finally get that value translated over into terms that give you a clear picture of worth — it’s probably already changed.
Keep reading to learn about a portfolio value calculation method that doesn’t make you want to scream.
Easily and Accurately Calculate Your Portfolio Value with Kubera
Kubera might be cutting-edge wealth tracker software under the hood, but it looks just like your very own modern personal balance sheet on the surface.
Thanks to our integration with several different financial aggregators and an interface we designed to mimic the most easy-to-use spreadsheet, Kubera makes for the best all-around portfolio management tool no matter how many different assets you have to track — but we’ll zoom in on the crypto tracker features since it’s such a hot topic lately.
As we explained above, finding and keeping track of the value of a crypto-based asset by hand is difficult, because its value is tied to the cryptocurrency which you used to purchase it. So don’t do it by hand!
Kubera can automatically calculate the internal rate of return (IRR is a more detailed version of ROI) on any asset in your preferred FIAT currency. All you have to do is make sure the asset is up to date in Kubera, which includes documenting the amount for which you purchased it, its current value, and any cash flow in or out of the investment. Kubera will add holding time and instantly display your IRR — in your preferred currency.
In addition, Kubera will even throw up the current performance of popular indices and cryptocurrencies (S&P 500, Bitcoin, etc.), so you can compare it against your own asset’s performance.
For even more details and a video on how Kubera will help you find and monitor IRR for difficult assets, read our help center article.
OK, now we can move on to the other assets in your portfolio.
Just use that clean interface we mentioned above to provide the details on everything you own. Account-based assets — stocks, bank accounts, crypto wallets, etc. — can be connected to Kubera so that their values stay up to date in real-time. Assets that aren’t attached to an account — these are typically physical ones like antiques, artwork, etc. — are still simple to add and keep up to date in Kubera.
With our recap view, you’ll be able to enjoy a complete picture of your portfolio and its value, at any time and no matter where you are in the world (Yeah, we’re accessible globally on desktop, iOS, and Android!).
To see Kubera’s key features in action, be sure to check out our how Kubera works page.
If you work with a financial advisor, wealth manager, or a similar financial pro — tell them about Kubera. This singular platform can improve the way you organize your assets and give your financial professional all the information they need to help you create stellar wealth goals.
Sign up to start your trial and affordable subscription with Kubera and never sigh another sigh when it comes time to measure and manage your portfolio value.
