Risk Measurement Tools and Sites
One of the key principles in building a portfolio of investments (stocks, bonds, mutual funds, ETFs, cash, etc) is managing the amount of risk you're willing to take. Risk is a difficult thing to measure, but, a number of web sites and tools attempt to do that. I'll briefly outline a few I have used:
RiskGrades - is a web site that provides risk evaluation. Currently it's a free service, you just need to sign up for it. It lets you enter your investments, such as stocks, mutual funds, etfs, or cash, and it calculates the risk from them. It also lets you simulate events (such as 9/11, Black Monday, and more) to see how your portfolio would have performed under stress. It is a nice tool but the web site seems rather slow and sometimes is a bit flakey. The user interface needs a lot of work.
ETrade Risk Analyzer - this risk analysis tool is licensed from RiskMetrics, which makes the RiskGrades tool. However, I think ETrade's version has a simpler, easier-to-use interface, and is more robust and better organized. Also ETrade's risk analyzer is free for ETrade customers, and lets you easily assess the risk of your portfolio. It can plot your risk compared to various standard benchmarks and lets you simulate stress events as well. Highly recommended.
FinancialEngines - provides monte carlo simulations of your portfolio. It's a very nice site that lets you gauge the likelihood that you will reach your target goals for retirement with a given portfolio. Whereas the other sites mainly measured risks of your portfolio, FinancialEngines simulates the likelihood of reaching a retirement target date with the desired amount of assets. It provides nice ways to let you explore different variations on your portfolio too. It costs some money to subscribe, unless you get access through your employer 401k plan if they have a subscription. The site is nicely designed, easy to understand, and useful.
Morningstar Risk Analyzer - This tool is the simplest of the risk analysis tools. It's available to you if you have a paid subscription to Morningstar. It shows you the risk of each component of your portfolio. You can adjust the amount of risk you want and the tool then shows you the allocations that would be needed to meet the chosen risk level.
Morningstar Instant XRay - Although not quite a risk analysis tool, it does help you get the big picture of your portfolio. It's an excellent tool that shows you your overall asset classes. If you're a paid subscriber to Morningstar, you can also see their automated computer analysis of your portfolio. What's neat about this tool is that if you own a a portfolio of mutual funds and/or ETFs, it will use the underlying stocks, bonds, or other assets to calculate a true snapshot of what is in your portfolio. Overall an excellent tool.