Google’s free latest offer, however, is a little late and short of its rival, Yahoo, which started the service late last week with coverage of stocks listed on both NYSE and NASDAQ.

I really don’t understand the big deal behind delaying the quote by 20 minutes. If companies like Google and Yahoo have means to get free real-time quotes, they should make them available to users because for everyone who wants to make a trade based on the stock price, he/she already gets the real-time quote from his/her broker anyway. And for those who don’t care, whether the quote is real-time or delayed doesn’t make any difference.

Anyway, I am glad that Google and Yahoo make the real-time quotes available to everybody. It just makes two of my favorite financial tools more convenient.

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Google Followed Yahoo in Offering Real-Time Stock Quotes

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To make it more usable, I made a small calculator that takes into consideration the money you already have. Of course, with the calculator, you can save whatever amount you want every month, assume whatever annual return you want and see when you will become a millionaire

Give it a try and let me know if you like it.

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Millionaire Calculator

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Recently (less than two months actually), XTF, an investment firm that specializes in exchange traded funds (ETFs) investing, introduced another service, ETF Rating to help investors get a comprehensive view of a fund. The following is the screenshot of PowerShares Water ETF PHO.

XTF’s ETF rating consists of two parts: the structural integrity and investment metrics. According to XTF, the structural integrity measures the fund manager’s ability to mimic the fund’s underlying index. Though from a fund’s prospectus investors have the information about the fund’s correlation with the index it tracks, errors still exist and from time to time, the fund’s investment could drift aways from its underlying index. XFT’s structural integrity rating considers a ETF’s tracking error, expense ratio (ER), bid/ask ratio, market impact, concentration risk, efficiency and capital gains distributions to give a fund a score on a scale of 1 to 10.

The investment metrics rating looks at the fund’s long term investment performance by evaluating its yield, risk, and historical performance.

This part of the information may not be particularly helpful right now because most of the ETFs have very short history and the longest history is likely to be only one year or less. Thus the rating could be skewed by short-term fluctuation.

Combining the two ratings together, XTF will also assign an overall score to the ETF which is used to compares the fund to its peers, as shown in the picture below. Though the summary mentions that PHO belongs to a group of 9 funds with similar objective, exactly what those 8 funds are couldn’t be found from the rating page. Such information, however, could be very helpful for investors to select which fund to invest in.

Overall, I feel it’s a quite convenient tool to research EFTs. Basic information of a fund is presented in a way that I can easily find out what I want to know about the fund. Some of the information such as bid/ask ratio, tracking error and efficiency is not available at other ETF research sites such ETFConnect.com and Morningstar.com, making XTF quite unique.

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Using XTF’s Rating Tool to Research ETFs

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However, if you want to get some professional help for investing/financial planning, it’s always good to know as much background information about the broker/adviser as possible before letting him/her handle your finance. Recommendations from friends and relatives are important in selecting the right broker. However, there is always some information (for example, any violations) that can’t be obtained from first hand experience and personal view sometimes is biased. If there’s any concerns regarding a broker, information about the broker’s working history that is presented as-is will be valuable to make your own decision on whehter that’s the person you want to work with.

There’s a tool that can give you some background information of a broker you have in mind. It’s the BrokerCheck from FINRA (Financial Industry Regulatory Authority), formerly NASD. From the description:

FINRA BrokerCheck is a free online tool to help investors check the professional background of current and former FINRA-registered securities firms and brokers. It should be the first resource investors turn to when choosing whether to do business with a particular broker or brokerage firm.

I used the tool to check one of my friends who is a registered broker and found very thorough information on his current registration, qualifications (industry exams passed), complete registration and employment history, and affiliation history. Information disclosed by BrokerCheck include:

regulatory actions, investment-related civil suits, customer disputes that contain allegations of sales practice violations against brokers, all felony charges and convictions, misdemeanor charges and convictions relating to security violations, and financial events such as bankruptcies, compromises with creditors, judgements, and liens.

Information on BrokerCheck report is generated from Central Registration Depository (CRD) and is up-to-date as broker, brokerage firm, or regulator is requited to submit a report within 30 days of an event.

Following is the screenshot (click to enlarge) of the summary of the convicted broker Frank Quattron. BrokerCheck can generate full report in PDF format as well (here’s a sample copy of Frank Quattron’s report).

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Got a Broker? BrokerCheck It before Using It

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If you go to Morningstar.com and enter a fund ticker symbol (for example, VFINX), then click the Fees & Expenses on the left, you can see a summary of the fund’s expenses

It basically contains all the information I need, how it’s not very flexible as I can only take what it gives me (such as the total cost projection for 3-, 5-, and 10-year holding periods). To get a customizable cost analysis and comparison, I like the Mutual Fund Expenses Analyzer from FINRA (Financial Industry Regulatory Authority, formerly NASDD).

The FINRA MFEA consists of two sections. In the first section, you can enter up to 3 funds (or ETFs) to do a cost analysis and comparison.

All you need to do is entering the fund’s ticker symbol (or select a fund family and enter some keywords) and do a Search. Fund that meets the search criterion will show up in the Fund window. In this case, I entered symbols VFINX and PREIX (T. R. Price Equity Index 500) as I want a head-to-head comparison of these two funds.

In the second section, I can enter a little more information on how I want to compare the expenses of these two funds. Available options include the Investment Amount, Rate of Return, and Holding Period.

After entering the details, the analyzer calculates the estimated expenses of these two funds based on the information I provided (shown in the following figure, click to enlarge).

I can also choose a graphic display of the analysis results as shown in the following plot.

Of course, the above comparison is based on the same set of assumptions, especially the annual rate of return (which is assumed to be 8% for both funds). This, however, is seldom the case in reality. If I want to compare funds with different returns, I have to get the expense of each fund one by one (without entering the second or third fund) and compare them manually.

As shown above, the best part of this analyzer is I can customize the data (I usually use a fund’s annualized return data from Morningstar as the rate of return) so the result can be closer to what I want. On the other hand, the Morningstar cost projection is based on a fixed rate of return since it shows

how much an investor would expect to pay in expenses–sales charges (loads) and fees–over the next three, five, and 10 years, assuming a $10,000 investment that grows by 5% per year with redemption at the end of each time period.

Obviously, using 5% annual return to calculate a fund’s expenses doesn’t necessarily make the estimate more accurate than using the fund’s past return though “Past return doesn’t guarantee future performance.”

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Analyze Mutual Fund Costs with FINRA’s Mutual Fund Expense Analyzer

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So in addition to Quicken, which is for the only purpose of tracking transactions, I also use Excel spreadsheet to calculate my actual returns. Besides, since I do dollar-cost averaging throughout the year, the returns from the return from the  fund report isn’t really what I get. The following is an example of the spreadsheet that I use to calculate my 2006 PRR of Dodge & Cox International Fund (DODFX).

Regular purchases

At the beginning of 2006, I had a total of 305.349 shares at $35.02 per share. Through out the year, I bought $100 of the fund on average every month and each time I made a purchase, I calculated:

• Shares added: This is the number of shares purchased each time. For example, on 01/31/2006, $100 got me $100/$37.32 = 2.68 shares.
• Total shares: The above purchase made the total shares I owned on 01/31/2006 at 305.349 + 2.68 = 308.029 shares.

The process continued each time shares were purchased.

Reinvested distributions

I don’t take any distributions as cash. Instead, they were all reinvested which, in turn, added more shares to my possession. And these extra shares will continue to generate dividends and capital gains in the future, with increasing impact on the overall returns.

On December 28, 2006, DODFX distributed dividend and short-term (ST) and long-term (LT) capital gains of a total $1.18 per share. At that time, I have accumulated 333.795 shares from regular purchases and the reinvested distributions gave me 333.795 * $1.18 / $43.62 = 9.03 shares.

Personal rate of return

At the end of 2006, the total shares I own increased to 345.114 as compared to 305.349 when the year began. The market value of my investment changed from $10,693.32 to $15,067.68. Of the $4,374.36 market value increases, $1,200 came from my own contribution. Thus, my personal rate of return for 2006 is

PRR = ($4,374.36 - $1,200) / $10,693.32 = 29.69%

Quite impressive

PRR and total return

If you check Moringstar’s data, you will find that the total return of DODFX in 2006 is 28.0%. How could my PRR be higher than the total return? The 28.0% total return is calculated based on the assumption that no additional purchase is made throughout the year (here’s my explanation of total return). The 305.349 shares remained the same until December 28th when distributions were made and the total shares after the distributions were 305.349 + 305.349 * $1.18 / $43.62 = 313.609. Now I can calculate the total return as

Total return = (313.609 * $43.62 - $10,693.32) / $10,693.32 = 28.04%

exactly the total return from Morningstar.

The value of dividend reinvestment

As it turned out that though I dollar-cost averaged in an upmarket (DODFC share price increased from $35.02 to $43.66), my PRR is till 1.65% higher than the total return. This extra return is solely due to the reinvested distributions from the additional shares bought priori to the payout. (check out this post for more details on DCA and dividend reinvestment) And as I keep adding shares throughout the year, the contribution from the reinvested distributions becomes more and more significant in terms of the overall returns. Thus, at the accumulation stage, reinvesting all the distributions is a better strategy for the long term growth.

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Calculating My Personal Rate of Return

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• No ER information
• No separate lists for sector funds

It shows all the returns and trading volume, but if I want to find out the cost of each fund, I will have to click on each item and go to the fund’s separate page to get the information I want, which happens to be one of the most important data when evaluating a fund.

Then I recently found a couple supplemental tools that can give me most of the information I want without checking the funds one by one.

For all-in-one-page ER data, XTF ETF Finder is the tool I am now using. ETF Finder conveniently lists all the ETFs, by sector, style, asset class, or market cap, with their ERs. One drawback, however, is that I can’t sort the funds according to their ERs.

For some new ETF offerings (those having a few months of history), neither XTF nor Morningstar reports ER information. In this case, I will have to use the fund’s prospectus to see how much the fund will charge in fees. In addition, XTF also has Advanced ETF Screener.

Since I usually pay a great deal of attention to the fund’s yield, it would be nice if I can easily get distribution data from multiple funds for easy comparison. For that, I use ETF Connect’s ETF Sorter.

Here, funds are sorted by their distribution rates, so I can easily find out the fund’s yield in a single page.

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Some ETF Research Tools

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Following the link in the article, I went on to check one of the tools, Guru Screener, at Nasdaq.com, which can be found on the left hand side in the middle of the page. I guess one of the reasons I never knew the tool is I only visited the Nasdaq website a couple of times several years ago, not sure if the tool was available at that time or not. Also, I only buy a small number of individual stocks (half of them are DRIP stocks) and don’t use any tool to select my targets.

Currently the screening tool includes the following gurus:

• Growth/Value Investor: based on the work of James P. O’Shaughnessy
• P/E Growth Investor: based on the work of Peter Lynch
• Small Cap Growth Investor: based on the work of The Motley Fool
• Momentum Investor: based on the work of Validea Momentum Strategy
• Value Investor: based on the work of Benjamin Graham
• Price/Sales Investor: based on the work of Kenneth Fisher
• Contrarian Investor: based on the work of David Dreman
• Growth Investor: based on the work of Martin Zweig

Of them, I have read the book, The Intelligent Investor*, by Graham and quite familiar with his value based approach. The tool also applies principles developed in the book to identify values stocks. Graham’s approach in the book can be summarized as:

Graham recommended buying stocks of large, prominent and conservatively financed companies with a long record of continuous dividend payments. He warned against stocks with price-to-earnings ratios of more than 25 times trailing seven-year average annual earnings, or more than 20 times their prior 12-months results. (He did that even though he knew it meant excluding growth stocks.) A true bargain, Graham insisted, was a company whose real value was at least 50% more than its stock price.

Applying Graham’s criteria, the screener returned about 45 stocks (including stocks listed on NASDAQ and NYSE).

I am not sure how valuable this tool is as when I want to buy a stock, I usually already have something on my mind and only use tools like Yahoo Finance or Morningstar to gather some data. If, however, I have no idea on what to buy, this tool can certainly help me narrow the initial range.

* Affiliate link

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Picking Stocks Like a Guru

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The Millionaire Investor Index currently has a reading of 15 at the end of April, up 10 points from March. Reading of the index can indicate whether wealthy investors are bullish or bearish about the market. The current value of 15 is in the mildly bullish according to the Reuters news. The previous reading of 5 was in the neutral range, after the roller coaster month from late February to early March.

I don’t find this index particularly useful as it only focuses on a small group of wealthy people and how they perceive the market is different from our small investors because I feel they can tolerate more market fluctuations. When they say they are mildly bearish, I might already feel a bear market.

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Millionaire Index?

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If you are interested in knowing a stock’s whisper number before earning release, there are two websites which publish whisper numbers that are collected from traders:

• Whispernumber.com
• Earningswhispers.com

Both sites have free service, which basically covers the whisper numbers, as well as paid services which include stock analysis and investor sentiments. Whispernumber.com offers a little more free stuff, such as whisper tracking and earning update. However, to get these free services, you need to register with them and the activation email they promised to send me after my registration never came! I have used three different email address to sign up and none got response from them. An email to their customer service regarding the registration process also seemed to fall on deaf ears.

Here’s an example how Dell’s whisper number looks like from Earningswhispers.com. The whisper numbers are helpful in getting investors sentiments about a company’s earning and future outlook beyond the view of the street, which is sometime biased. Despite the apparent usefulness of whisper numbers, it should only be part of the criteria that an investor needs to consider when making financial decisions.

If you enjoyed reading this post, subscribe to the RSS feed or get it via email delivery.

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Know Who’s Whispering What before Earning Release

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Simply place the cursor over the investment style you are interested in and click, then a list of ETFs in that category will appear with information such as style, returns, and trading volume.

However what’s missing from the list is what I consider one of the most important factors in determining which to invest for mutual funds: the expense ratio (ER). Though for ETFs, the ERs are generally lower than their mutual fund counterparts, they are still playing a key role when considering my investment choice, not just that the returns matter. In this case, I have to manually click on each ETF and go to their individual page to find out the ER.

The trading volume should also be considered, though it does not have directly impact on the returns of the fund, it affects how much you pay when buying the fund. Generally, the larger the trading volume, the smaller the bid-ask spread. The bid price is the highest price somebody is willing to pay to buy your shares if you want to sell them, while the ask price is the lowest price that someone is willing to sell a stock.

This tool is only available for domestic funds. For international equity ETFs, the list is much longer without detailed categorization.

If you enjoyed reading this post, subscribe to the RSS feed.

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Morningstar’s ETF Selection Tool

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What I like the most is the way I can change the time range. At the bottom of the chart, there is a menu "Time Range" and if I mouse over the menu, a small window with a slider pops up. To change time range, I simply move the slider and the chart in the main window changes immediately. Very smooth.

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I Like The New Yahoo Finance Chart

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For the 2007 version, the most noticeable change is the interface, a much nicer home window. The startup window now shows the balance of the current month: the income, the expenses, and the remains. The data are extracted from transactions doweloaded from banks and credit cards.

Other improvements over the 2006 version which I used before the upgrade include:

• Better graphical presentation of charts;
• Detailed cashflow information;
• Local business rating with Zipingo.

However, the income and expenses numbers reported by Quicken shall not be taken as they are. I was shocked when I first saw my 5-figure income and expenses. Apparently, Quicken treats any deposit at my banks as income, even those transfered from my other banks. Equally, it reports all withdraws as expenses including those that are actually moved from one bank to another. This way, both the income and expenses are inflated, though the balance is not affected.

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Upgrade To Quicken 2007

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