Improve Your Investing With Excel

You probably knew that Microsoft’s Excel spreadsheet program is a fine tool for keeping track of your investments in an organized manner, enabling you to see and sort positions, including entry price, periodic closing prices, and returns. But actually, Excel can do much more than serve as a glorified financial statement. It can automatically calculate metrics such as an asset’s or a portfolio’s standard deviation, percentage of return, and overall profit and loss.

Let’s look at how Excel can enhance one’s investment activities.

Tracking Investments With Excel

An Excel spreadsheet can be used in a number of ways to keep track of an investor’s holdings. The first step is to decide what data you would like to include. The figure below shows an example of a simple spreadsheet that tracks one investment’s data, including date, entry, size (how many shares), closing prices for the dates specified, the difference between the closing price and the entry price, the percentage return, profit and loss for each periodic closing price, and the standard deviation. A separate sheet in an Excel workbook can be used for each stock.

Creating Difference Formulas in Excel

Some values in the spreadsheet, however, must be manually calculated, which is time-consuming. However, you can insert a formula into a cell to do the work for you. To calculate the difference of an asset’s current price minus its entry price, for instance, click in the cell where you would like the difference to appear.

Next, type the equals sign (=) and then click in the cell containing the current price. Follow this with a minus sign and then click in the cell that contains the entry price. Then click enter and the difference will appear. If you click on the lower right corner of the cell until you see what looks like a dark plus sign (without little arrows on it), you can drag the formula to the other appropriate cells to find the difference for each dataset.

Creating Percent Return Formulas in Excel

The percent return is the difference of the current price minus the entry price, divided by the entry price: (price-entry) ÷ entry. The percent return calculation is made by, once again, selecting the cell where you would like the value to appear, then typing the equal sign. Next, type an open parenthesis and click in the cell that has the current price, followed by a minus sign, the entry price, and a closing parenthesis.

Next, type a forward slash (to represent division) and then click in the entry price cell again. Press enter and the percent return will appear. You may need to highlight the column, right-click, and select Format Cells to select Percentage under the number tab to make these values appear as percentages. When you have the formula in one cell, you can click and drag (as above) to copy the formula into the corresponding cells.

Creating Profit/Loss Formulas in Excel

The profit and loss formula is the difference multiplied by the number of shares. To create the formula, click in the cell where you want the value to appear. Next, type the equals sign and then click in the cell that contains the difference (see above). Then, type the asterisk symbol (*) to represent multiplication and then click in the cell that contains the number of shares. Press enter and you will see the profit and loss for that data. You may need to highlight the column, right-click, and select Format Cells, then select the currency to set the column to display as a dollar amount. You can then select, click, and drag the formula to copy it into the other corresponding cells.

Creating Standard Deviation Formulas in Excel

The mainstay of modern portfolio theory, the standard deviation for a dataset can reveal important information regarding an investment’s risk. The standard deviation is simply the measure of how far returns are from their statistical average; in other words, it allows investors to determine the above-average risk or volatility of an investment. The standard deviation of returns is a more accurate measure than looking at periodic returns because it takes all values into account.

The standard deviation calculation is a complex, time-consuming mathematical equation. Fortunately, a few simple clicks in Excel can provide the same calculation. Even if an investor does not understand the math behind the value, the risk and volatility of a particular stock or the entire portfolio can be measured with relative ease.

To find the standard deviation of a dataset, click on the cell where you want the standard deviation value to appear. Next, under the Formulas heading in Excel, select the Insert Function option (this looks like fx). The Insert Function box will appear, and under Select a Category choose Statistical. Scroll down and select STDEV, then click OK. Next, highlight the cells for which you want to find the standard deviation (in this case, the cells in the percent return column; be careful to select only the return values and not any headers). Then click OK and the standard deviation calculation will appear in the cell.

Viewing a Portfolio in Excel

You can compile data from the individual sheets in Excel to get a sense of all holdings at a glance. If you have data on one sheet in Excel that you would like to copy to a different sheet, you can select, copy, and paste the data into a new location. In this way, it is easy to import a series of stocks’ data into one sheet. All of the formulas are the same as in the previous examples, and the standard deviation calculation is based on the percent return of all of the stocks, rather than just a single instrument.

The figure below shows data from 11 different stocks, including entry date and price, the number of shares, the current price, the difference between the current price and the entry price, the percent return, the profit and loss, and the overall standard deviation.

Other Tips for Using Excel

When a spreadsheet has been formatted with the data you would like to see as well as the necessary formulas, entering and comparing data is relatively simple. But it pays to take the time to set up the sheets exactly how you want them and eliminate or hide any extraneous data. To hide a column or row of data, highlight it, and under the Home tab, select Format. A drop-down menu will appear; select Hide or Unhide, choosing the option you want. Any data that is hidden can still be accessed for calculations but will not show up in the spreadsheet. This is helpful when creating a streamlined, easy-to-read spreadsheet.

Of course, there are alternatives to setting up the spreadsheet by yourself. A considerable number of commercial products are available from which you can choose portfolio management software that works in concert with Excel. An internet search can help interested investors learn about these opportunities.

The Bottom Line

An Excel spreadsheet can be as easy or complex as you want it to be. Personal preference and needs dictate the complexity of the spreadsheet. The key is to understand whatever data you do decide to include so that you can gain insight from it. Those interested in learning about other ways to use this software may wish to enroll in one of the best online Excel classes currently available.