Information about Quantext's Portfolio Planners
Quantext portfolio planners provide:
- the ability to see whether your portfolio is actually more risky than you believe
- the ability to see whether your basic financial plans are reasonable
- the ability to determine whether you have a well-diversified portfolio
- the ability to adjust a portfolio to get the best risk/return balance for specific needs
Quantext Portfolio Planner (QPP) is a portfolio planning tool for individual investors and for professional advisors. This tool assists in planning for asset allocation and the future income draws that can be supported. QPP combines Monte Carlo simulation with a range of sophisticated analytics to help investors develop the right portfolio. For more information on the Monte Carlo engine inside of QPP please see our FAQ on Monte Carlo Analysis.
Many asset allocation tools simply look at historical behavior of portfolios. The standard of practice in institutional finance, however, is forward-looking portfolio analysis. QPP is a forward-looking portfolio analysis tool. We discuss forward-looking models used by institutional investors and the consistency of a number of benchmark results to QPP in this article.
We believe that QPP is the very best portfolio planning and asset allocation tool available--and we have performed numerous analyses and tests to demonstrate that this is the case. We have a series of these studies available for your review in our library. One article that provides a broad overview is provided here.
Many asset allocation tools simply look at historical behavior of portfolios. The standard of practice in institutional finance, however, is forward-looking portfolio analysis. QPP is a forward-looking portfolio analysis tool. We discuss forward-looking models used by institutional investors and the consistency of a number of benchmark results to QPP in this article.
We believe that QPP is the very best portfolio planning and asset allocation tool available--and we have performed numerous analyses and tests to demonstrate that this is the case. We have a series of these studies available for your review in our library. One article that provides a broad overview is provided here.
What Make Quantext's Tools Special?
Many systems use shortcuts that assign investments to broad classes (style analysis), but ignore specific details of a position. Two funds of similar 'style' might be projected to have exactly the same future risk and return even if they have historically been quite different in that respect. Our approach of accounting for each asset individually also means that our approach will tend to be better for portfolios that are concentrated.- Quantext's tools model individual stocks and funds, not just indices or asset classes
- Quantext's tools account for employee stock options and their impact on portfolio planning
- Quantext's tools calculate portfolio dividend yields automatically to help income investors
- Quantext's two versions are simple enough for the knowledgeable individual investor but sophisticated enough for professional advisors
- Quantext's tools are very fast--much faster than comparable tools
- Quantext's basic Monte Carlo portfolio tool, Quantext Portfolio Planner, can be set up and run very easily
- Quantext's Monte Carlo tools generate clear and intuitive reports that can be easily printed or emailed
- Quantext's Monte Carlo risk projections have been extensively tested and validated (many Monte Carlo models have not been benchmarked.) See paper here. Paper from 2006 here
- Quantext's Monte Carlo tools capture non-market correlations between portfolio assets--something other systems do not do as well
- The user can easily see the projected risk and return for each asset in the portfolio and adjust (if they wish)
- Our reports show you short-term risk, potential loss, etc. on a user-defined time horizon (days to months), as well as the long-term projections
QPP vs. QRP
In the early days of Quantext's portfolio planning software, it was called Quantext Retirement Planner (QRP). Somewhere along the line, Geoff Considine, the software's creator, decided that certain features (degrees of freedom) were not really useful, and so he got rid of them (locked them down.) Though QPP and QRP are very similar, they do have some differnces. We continue to offer both versions, however, Geoff uses QPP (and QPP40, its larger twin) exclusively. QRP requires the user to have a solid grasp of statistics while QPP is much more user friendly.The differences between QPP(20 or 40) and QRP
QPP, QPP40 and QRP use the same basic underlying analytics; they all perform forward-looking Monte Carlo analysis. There are some differences between the planners, however.QRP was Quantext’s original version of the software and, thus, was given the name Quantext Retirement Planner –though all of the versions, QPP, QPP40 and QRP, have the same retirement planning features. (It’s hard to change the name once so many articles have been written!) The main difference is that QRP allows the user to run analysis using: 1) pure historical data, 2) automatically-generated parameters, or 3) customized parameter sets. This means that you could run a portfolio with the basic parameters and then adjust any of the following parameters by hand: Beta, standard deviation, and alpha for the individual stocks or funds. QPP allows the user to adjust many parameters, but it is not as flexible in terms of user adjustments of parameters. Both QPP and QRP allow adjustment with respect to view on future market returns and annual standard deviation, as well as individual stock and fund total returns. Please see the Table of Features below for a more thorough comparison.
The other main difference is the number of tickers that can be used. QPP accepts 20. QPP40 accepts 40. QRP accepts 20 but can handle up to 380 via an indirect method of creating sub-portfolios and then meshing them together. This process is labor intensive and rather time consuming.
Please see the Table of Features below for comparison of adjustable parameters.
QPP is the version of choice for most investors and advisors, limiting the adjustable parameters to those that most advisors or investors might have interest in varying. For the all of his research and his articles and research, Geoff uses QPP. Again, QRP requires the that the user be quite comfortable with statistics while QPP is much more user friendly.
QPP40 is an enlarged version of QPP that can handle up to 40 individual positions (more details below).
Which version should I license?
Based on the experience of our users, we suggest QPP for users who do not have more than 20 holdings in their portfolios. We recommend QPP40 for those users with larger numbers of positions.A license of QPP40 includes a copy of QPP(20) so that the user can study smaller portfolios (or a portion of a larger portfolio) with the faster QPP(20), though on today's machines, the time required to run calculations is small to negligible.
QRP is for those users who want additional flexibility to hand-adjust parameters like the volatilities and Betas of individual positions. QRP is larger (and slower) than QPP. QRP would only be a good choice for users who are comfortable with statistics as the users can potentially input parameter sets that are not internally compatible. (QRP gives you a warning if this should happen, but the user will need to be able to understand the meaning of this and right the situation.)
Finally, we would like to note that multiple users have not been able to get QRP to work with Excel 2007 or 2010. On all versions of Excel 2002-2006, it runs well, however. QPP runs well on all versions of Excel newer than 2000.
| Table of Features | QPP | QPP40 | QRP |
|---|---|---|---|
| Accepted number of tickers | 20 | 40 | 20 -but can accept up to 380 via an indirect method* |
| Source of statistical projection | Quantext's forward looking simulator | Quantext's forward looking simulator | Quantext's forward looking simulator OR hand adjusted parameters OR a combo of these |
| Retirement planning capabilities | Yes | Yes | Yes |
| Correlations Table | Yes | Yes | Yes |
| Employee Stock Options Tool | Yes | Yes | Yes |
| Ability to include stock options | Yes | Yes | Yes |
| Custom Savings Draw Tool | Yes | Yes | Yes |
| Savings and Income Draw are customizable over time? | Yes | Yes | Yes |
| Accounts for fund fees | Yes | Yes | Yes |
| Loads can be input manually | Yes | Yes | Yes |
| Accounts for splits | Yes | Yes | Yes |
| Accounts for dividend yield | Yes | Yes | Yes |
| Shows forward-looking , expected dividend yield | Yes | Yes | Yes |
| Adjustable view on expected market returns | Yes | Yes | Yes |
| Adjustable view on annual standard deviation on market returns | Yes | Yes | Yes |
| Adjustable expected return on individual tickers | Yes | Yes | Yes |
| Adjustable Beta on individual tickers | No | No | Yes |
| Adjustable volatility on individual tickers | No | No | Yes |
*You can include up to 380 tickers using QRP, but you must use an indirect method. A pdf document with directions for this process is included on the QRP disc, which you receive when you license this product.
Why does QPP limit you to 20 positions?
The research shows that 20 individual stocks, properly chosen, will get you the all of the available diversification benefits. Any more than this adds no benefit. See the following link:http://www.investopedia.com/articles/01/051601.asp
This issue is also discussed in A Random Walk Down Wall Street.
This is true if you have 20 individual stocks. If you have funds, which are already an aggregate of many stocks and/or bonds, you need even fewer positions. This is one of the best-established results of portfolio theory. You will get far more benefit from choosing the 20 portfolio components carefully than simply having many different positions. Just adding more choices to a portfolio will not get you much in terms of diversification effects. For more information on diversification please visit our Library.
