I even have a Winter Solstice gift for you. Our Web elves have been working night and day to finish up this project in time for us to use it for our Foolish Four Switch this year (which takes place next Monday morning).
The Foolish Buy Calculator, also known as BuyCalc by those of us who've gotten tired of saying "Foolish Buy Calculator" 20 times in a conversation, is a nifty online feature that helps you calculate the optimum number of shares to buy for your Foolish Four portfolio. It was inspired by a shareware program put together by Michael Pizolato. He created an Excel spreadsheet to help with his own portfolio purchases and graciously offered it to the world at large and to us as a basis for our online version. Check out his Web page. He has included a self-portrait at the bottom. Thanks muchly, Piz.
I really could have used this last year. I cut my calculations a bit too close and ended up with one less share of International Paper (NYSE: IP) than I'd planned on. It's easy for me to write "Take the size of your portfolio, divide by the number of stocks to get a target value, then divide the current purchase price of each stock into that target value to see how many shares you should buy." That's not so easy in practice.
It works OK as long as the prices are relatively stable, and, luckily, Foolish Four stocks don't jump around like Internet IPOs. But if your goal is to get absolutely as much of your money working for you in the market as possible, it's not optimally efficient.
For one thing, there will always be money left over. To make sure you don't go over your available cash, you have to round down the number of shares you buy. Do that once or twice, and you have enough to buy an additional share or two of the remaining stocks -- if you recalculate everything. Ideally, after you make each purchase, you should split the money left over among the remaining stocks. There will be times when even a buck left over from one purchase, added to the available cash for the next one, will make it possible to buy an additional share. Getting the most out of your cash requires an awful lot of pencil-and-paper work.
The Foolish Buy Calculator handles all of that for you, recalculating the number of shares to buy for the remaining stocks after each purchase. It also lets you set an expense limit and warns you if a particular trade will exceed that limit, which is particularly helpful in deciding whether to buy or sell shares of a stock that is staying on for another year. The program will even tell you how many shares to buy (or sell) so that an old stock will be balanced with the new ones, and will also tell you if that small trade will exceed your expense limit. You can decide to balance or just stand pat.
I'm pretty excited about BuyCalc and I hope it will make the whole buying process easier and more accurate for all of us. Right now it is still in beta-test mode, so we aren't releasing it to the entire community. But you guys are special. (Meaning you're the suckers who get to find the remaining bugs! Well, I hope not.)
We will be putting links to it in various places around the site after the holidays, but for now, it's our special toy.
It's particularly useful with mechanical strategies like the Foolish Four and Workshop, but anyone who wants to divide a set amount of money equally among several stocks will find it very helpful.
Did I say divide a set amount of money "equally"? Actually, the program is smarter than that. If you are following a "juiced" version of the Foolish Four (a double investment in the top two stocks), or any other weighted plan, the program accommodates that, too. You just enter the percentage you want the "heavy" stocks to be and the program distributes the shares accordingly, equalizing any stocks that aren't weighted. Tres cool.
Here's how you calculate the percentage for weighting. Say you have four stocks, but you want a double weighting in the top-ranked stock. In effect, that stock gets two portions and the other three stocks get one portion each, so your portfolio is being divided into five portions with two going to one stock. OK, divide 100 by 5 to get 20%. Your top stock gets 40% and the other three get 20% each, although you only have to enter the proportion for the one that is different.
Speaking of ranks, the program will let you specify the order in which you want to buy your stocks. Normally it will sort the stocks by the current price, which is the most efficient way to make sure you use as much of your cash as possible. But if you want to be sure you get all the shares of the top-ranked stocks and that any reductions affect the lower-ranked stocks, you can enter ranking numbers, and the top-ranked stocks will be listed first so that you can easily buy them in rank order.
My, I am running on about this. I just really like it! As I mentioned, though, BuyCalc is still in beta-test mode. We've tested it in-house and a small group of users (thanks, guys!) put it through its paces over the last few days, discovering a number of bugs that we hope are squashed. However, this will be the first time that it will be used by a large community. Please be gentle. There are always a few bugs left, usually related to the way different browsers work.
If you are using anything other than Microsoft Internet Explorer for Windows or Mac version 4 or higher, or Netscape for Windows or Mac version 4 or higher, then we can't guarantee it will work properly for you. We hope it will -- but if not, please send a bug report that includes your browser type and a very specific description of the problem to TMF [email protected] Do me a favor, though -- please read the instructions first and note that you can click on any of the column headers and get a bit more help.
Comments on the instructions are also welcome. I'm writing them, and let me tell you, writing directions is a very fine art. I'll take all the help I can get.
So where is this wonder? Glad you asked. A bit of warning before you click over to it. We had to disable the Enter function to get it to work correctly with both Internet Explorer and Netscape, so just use the tab key or your mouse to move from place to place. When you move to a new field, the program will update.
OK, OK, I'll shut up and tell you where to find it. Click here: Foolish Buy Calculator
Have fun with the new toy, and try not to break it until after Christmas.
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