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Investors Business Daily
Investors Business Daily
Business
ADAM SHELL

Which Brokers Excel In Investment Portfolio Analysis And Trade Ideas?

The best online brokers do more than help you place trades. They touch base when the market plunges to let you know what's driving the sell-off and why you shouldn't panic.

They also offer tools that provide a snapshot of what's in your investment portfolio and how it's performing. And they suggest investment trade ideas.

Investors ranked Charles Schwab No. 1 overall in the 2023 IBD Best Online Brokers report. They also tabbed Schwab as No. 1 in the "timely information on market shifts" category. Vanguard was tops in the "portfolio analysis & reports" category, and Robinhood earned the No. 1 ranking in the "trade ideas" category.

IBD conducted its two-part survey with polling partner TechnoMetrica Market Intelligence from Aug. 19, 2022 through Nov. 13, 2022. Survey respondents were asked to rank 18 attributes on importance and then 3,446 investors rated their primary broker based on those attributes.

Keeping abreast of market moves was critical in 2022's bear market. Wall Street got slammed when inflation hit a four-decade high and the Federal Reserve responded with seven interest rate hikes, driving borrowing costs sharply higher.

"You don't want to hide your head in the sand when times get tough," said Barry Metzger, Schwab's head of trading & education.

That's why Schwab took a proactive approach. It put client outreach into overdrive.

Investment Portfolio: Client Outreach Is Critical In A Down Market

Schwab encouraged clients who work with financial advisors to call their advisors if market headlines were causing jitters. And it ramped up its website's daily livestreaming of market analysis via Schwab Live Daily.

Market experts such as Jeffrey Kleintop, chief global investment strategist, and Liz Ann Sonders, chief investment strategist, highlighted key Wall Street trends and risks. To earn its No. 1 ranking in timely information on market shifts, Schwab sent out countless emails and tweets addressing market volatility and ways customers could weather the storm.

The goal? "To make sure our clients understand what's happening in the market and are the most educated they can be so they can make the best financial decisions," Metzger said.

In a nutshell, Schwab's message was and is: "Don't panic," said Metzger. "Stay engaged. Stay the course" and remain diversified.

Metzger added: "You build your investment portfolio for the long-term, not the 100-yard dash."

Jennifer Lacki, 57, a frequent trader from Chicago and a Schwab customer for more than 25 years, recalls receiving missives from Schwab during big market downdrafts. "I definitely recall seeing the 'don't panic' type messages," she said.

What Lacki says would be more helpful, however, is if Schwab provided basic tutorials on how to decide if the hard-hit stocks she owns have what it takes to mount a comeback.

"What sort of analysis can I do to help determine what's still worth owning" in my investment portfolio, Lacki said. "If you see this, but not this and that, then sell the stock."

It would also be useful if Schwab could analyze her trading and highlight what she's doing wrong, she says.

Know Your Portfolio, Its Returns And Risks

Knowing what you own in your investment portfolio is important too. That's because how you divvy up your assets impacts the returns and risks you're taking. Vanguard, No. 1 in the portfolio analysis & reports attribute, offers an array of tools that let you look under the hood of your portfolio and see how the different parts are working.

"We provide clients with unbiased information that they can use to help them have investment success," said James Martielli, Vanguard's head of investment and trading services.

Vanguard's online brokerage analyzes your holdings under its Portfolio Watch section on its website. It will, for example, tally up the percentage of stocks and bonds you own. And let you know how your asset mix and performance compare with Wall Street benchmarks in different time frames.

You'll also get a snapshot of the types of returns you can expect based on history. For example, you can test how your returns would change, if, say, you boost your stock allocation from 65% to 75% and trim your bond holdings.

What else? You can learn if you're overweight or underweight in foreign stocks. Or whether your portfolio is skewed more toward growth stocks than value stocks.

Does your portfolio have too big a helping of technology stocks? Or perhaps you need to see if you're loaded up on riskier junk bonds, rather than investment grade debt.

The portfolio analysis tools offered by Vanguard lets you know "how does it all add up," Martielli said. "You might say, 'Oh, I didn't know I was making such a big bet on tech.' Or 'I'm pretty underweight in emerging markets stocks relative to a typical portfolio.'"

Trade Ideas: Robinhood Helps Investors Get Started

No discount brokerages scream "Buy This Stock." Still, Robinhood, which earned the No. 1 ranking in the trade ideas category, does help investors understand different investment opportunities.

One tool Robinhood offers to new customers is "First Trade Recommendations." New customers fill out a short questionnaire about their risk tolerance, income and financial goals. Then, Robinhood will suggest a diversified portfolio of four ETFs that invest in U.S. stocks, international and emerging market equities and U.S. bonds.

"Customers can get a recommended portfolio that makes sense for them," says Oliver McIntosh, senior product communications manager at Robinhood.

Robinhood offers a similar recommendation service to retirement investors.

This service also helps clients kick-start their investing. In this case, each recommended portfolio includes up to 10 ETFs chosen by Robinhood using a proprietary algorithm that match retirement account holder's preferences.

Retirement investors can purchase the algorithm recommended ETFs, or not. But Robinhood customers get free trade ideas and perhaps some food for thought on previously unexplored market sectors.

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