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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: chaz who wrote (35920)12/4/2000 9:27:31 AM
From: Mike Buckley  Read Replies (2) of 54805
 
Chaz,

So tell me, just what is a spreadsheet and what do they do that would make them useful to an investor?

A spreadsheet is exactly like columnar paper arranged in a series of vertical columns and horizontal rows. At the intersection of each row and column is a cell. A formula can be placed in each cell that makes a calculation. An example would be a formula that multiplies the number of shares in one cell by the stock price in another cell, yielding the total value of a particular stock position in a third cell.

There are two main advantages a spreadsheet offers. The first is that when one variable changes in a series of maybe thousands of calculations, the spreadsheet automatically recalculates those thousands. The second is that some very sophisticated financial formulas (such as the formula that calculates the rate of return of a series of investments over many, many years) can easily be placed in the cell of a spreadsheet. That makes it possible to make calculations not possible on a simple calculator and prevents the need to learn how to use a financial calculator.

Examples of how I use a spreadsheet:
1) tracking year-to-date performance of each stock;
2) tracking each stock's allocation in my portfolio;
3) tracking the market cap of each company in my portfolio;
4) tracking year-to-date performance of several indexes for easy comparison with performance of my portfolio;
5) tracking year-to-date performance of my portfolio;
6) comparing long-term performance of my portfolio with performances of indexes using various periods since 1990;
7) tracking performance of my portfolio taking into account the timing of additions to and withdrawals from the portfolio;
8) making 15-year projections of expected after-tax growth of my portfolio for critical planning issues, such as when to retire;
9) comparing actual growth in the portfolio to the projections mentioned in #8;
10) tracking rate of CDMA adoption, Gemstar advertising revenue, and the like; and
11) the most important one -- tracking the annual investment bet I make with my friend. As for this year's bet, I'm winning by 0.5% as of Friday's close. :)

I could do all of the above with pencil and paper. But it would take one heck of a lot more time and require that I store huge amounts of paper.

--Mike Buckley
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