The portfolio I will be constructing is based on the five Australian stocks highlighted in Smart Investor magazine. If you haven’t read the previous article on “Economic Moats” I would advise you to read that before reading this article. The tool I will be using for this is Google Finance, therefore you will need to sign up for a Google account (this is free). Go to Google Accounts and click on “create an account now “. Once you are logged in go to Google Finance click create portfolio and name the portfolio and then add desired stock.

Portfolio Calculations

In order to determine how much money we can allocate to each share we will have to do a few simple calculations. Firstly we work out each shares maximum share of equity, as we are giving equal weight to each different stock this is simply:

In order to simulate a real portfolio we will subtract the commission from the max share of equity, this will give us an actual max share of equity value. The next step is to get the current price for each of the shares, this will allow us to calculate the maximum number of shares we can buy in each stock.

The FLOOR function in Microsoft Excel is used to round down a given number to a specified level of significance. For example =FLOOR(63.78,1)=63. The table below highlights these calculations.

The next step is to edit your port folio and add the type of transaction, the number of shares bought or sold, price paid and commission. This is highlighted in the diagram below.

Once you have entered your data you should ensure the currency is set correctly. Now that everything is setup we can just log in at the end of the day download the spreadsheet of our performance with no hassle. Google Finance will automatically calculate:

• Market value of each share.

• Gain/loss for each share.

• Percentage gain loss for each share.

• Days gain.

• Overall return.

From time to time I will post performance details of this portfolio and will use it a basis for discussion. As you can see with Google finance and Microsoft Excel it is very easy to simulate portfolio construction. 

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