The Investor’s Toolbox: Seven Tools All Investors Should Know

May 20, 2023

Investing

Shloimy Feldman wanted to get more proactive about his finances. He did some background research on investing and personal finance, and now he needed to arrange his “tool box,” an array of software tools he could use to put his knowledge to work. Shloimy knew that professional investors and financial planners had access to complicated, expensive programs, but the tools he hoped to find would be user-friendly and, more importantly, free.

Does that kind of money tool box exist?

Today’s Financial Tools

The financial software available now to anyone with online access is truly astounding. Back in the 1990s, even simple budgeting programs were costly and clunky. Today, there’s free access to powerful tools and data that even Wall Street pros could only dream of decades ago. While professionals can access expensive tools and complex databases for sophisticated portfolio design, cash-flow modeling, and advanced tax analysis, most financial planning and investment needs can be handled using free sites and apps. These readily accessible tools are so user-friendly and powerful that many pros use them too!

Seven Top Tools

I’ll briefly present some financial tools that should be useful for many readers and mention the most obvious way to benefit from them. The sites chosen can be tapped for free (or close to it, in the final example). The paid versions have extra features, but most people will not require the upgrade.

Mutual Fund Research— Morningstar

When I want to take a quick look at a mutual fund, I often just Google the fund’s name or ticker together with the word Morningstar. Morningstar is the king of mutual fund research; no other company even comes close. The publicly traded company makes its money by selling data, research, and software to professional investors. Still, tons of useful fund data and analysis are available for free on its site. Morningstar also offers basic research on stocks and regularly issues very readable and credible reports about investment strategy, the economy, and sound financial planning.

Stock Screener— Macrotrends

Most investors should stick to mutual funds, but if you’re into stocks, Macrotrends offers a great free stock screener. While not as sophisticated as some paid databases, Macrotrends allows users to quickly filter a database of thousands of stocks based on company size, country, performance, and various profitability metrics. Even though I can access more in-depth options, I sometimes use Macrotrends since it is so easy to use and doesn’t require building complex queries. It also has some solid charts with long-term economic data for stock markets, interest rates, and commodities that I’ve found helpful over the years.

Portfolio Modeling— Portfolio Visualizer

Portfolio Visualizer offers a speedy software platform for portfolio and investment analytics. Use it for a quick reality check on proposed mutual funds or stock portfolios across many metrics and benchmarks. The search tool’s suggested feature is helpful, as is its modeling of portfolio cash flows, i.e., how it would perform if the investor made regular cash deposits or withdrawals. Portfolio Visualizer has helped me debunk plenty of investment myths on the fly. You’ll be amazed by how easy and powerful even the free version of this tool is.

I Bonds— Treasurydirect

Mutual funds are the most practical way to own most bonds, but I bonds are only available directly from treasurydirect.com, a website run by the federal government. Only I bonds offer both principal guarantees and rates that are adjusted biannually based on inflation. I bonds were definitely the best deal in town when I first wrote about them, (click here to read I Bonds: Your Best Bet for Secure Savings) as inflation roared into the double digits. But even as inflation has since subsided somewhat, I bonds remain a unique and useful tool, and the treasury website belongs in every investor’s tool box.

Online Broker— Fidelity or Vanguard

So, you found some great investment ideas on Morningstar and Macrotrends, and they modeled well on Portfolio Visualizer. Now what? How do you actually purchase the investments and put the portfolio plans in place? Fidelity and Vanguard are massive companies that offer online brokerage accounts and a host of other investment services too. A good analogy for these firms is that they are the Home Depot (or Lowe’s) of the financial world. Like in a home-improvement superstore, you decide what level of service to tap into when using online financial behemoths, and the cost structures vary greatly based on your needs and selections.

Online brokers offer a vast array of investment options, stocks, bonds, mutual funds, etc., including some sold under their own brands, for investors to buy in a multitude of account types. Vanguard and Fidelity offer many services for those who want help beyond just buying investments, including personalized portfolio design, financial planning, cash management, and corporate retirement accounts. They also offer free research on many financial topics. I have accounts with both Vanguard and Fidelity. It’s like Lowe’s and Home Depot—each has its pros and cons, but you can get the job done with either.

Robo Adviser— Betterment

For investors who have simple needs and are intimidated by the full-size investment “supermarkets,” a “robo” investment adviser can be a solid alternative. Robos prompt users to answer questions about their goals and risk tolerance and use the answers to design and manage, via automated technology, a diversified portfolio of low-cost ETFs (exchange-traded funds) for clients. These portfolios are similar to what you get from a decent target-date fund but generally cost more. That being said, I was impressed with the simplicity and power of Betterment, a leading robo adviser which charges about 0.3% for its platform.

We Want More

This list is far from comprehensive. These tools are a sampling of those that I came across and liked, but software changes quickly. There are definitely already new and improved options out there that are as good or even better. So, if you have a favorite financial tool that others may benefit from, I’d love to hear about it.