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The Investment Performance report is incorrectly handling investment expenses

unknown

I have an account which has a monthly administration fee. The fee is taken by selling some shares in a money market fund that is within the overall account. In Quicken I record the transaction is two steps - (1) I sell the required shares of the money market fund which creates a cash balance for the amount of the expense and (2) record a Miscellaneous Expense with the category Invest Exp for the amount which zeroes the cash balance.

The problem I have is that when I run the Investment Performance report, the Miscellaneous Expense is shown as a return and inflates the performance. For example the report would show as follows:

Date Account Action Description Investments Returns Avg Annual
1/1/2017 Beg Mkt Val $25,000
1/31/2017 Retire Cash $50
2/28/2017 Retire Cash $50
3/31/2017 Retire Cash $50
4/10/2017 End Mkt Val $26,450
__________________________________________________________________________
Total 1/1/2017 - 4/10/2017 $25,000 $26,600 25.7%

Notice that the total of the Returns column includes the 3 charges of $50 each for the investment expense. This is the issue.

Any suggestions?

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Comments

unknown

Well, my understanding would be that you sold the shares of the stock to pay for the investment fees.

Therefore, it IS a return on your investment from a realized gain.

So, I would guess that the calculation is correct.

Now, if you paid out of pocket from a checking account for those fees, that's a different issue. But you, in fact, sold stock to pay for those fees.

BTW, you're doing the transactions exactly correct. I have the same scenario and the procedure you described is EXACTLY what I do.

unknown

I understand what you are saying, but I'm looking at it differently. The stock (actually Money Market shares) was sold at the same price the shares were purchased (in this case $1/share). There is no gain. The money raised is simply done to produce cash to pay for the administrative fee. I think the only performance measure that is helpful is:

Beginning Market Value
+ realized gains
+ unrealized gains
- realized losses
- unrealized losses
- fees deducted from the account

This should equal ending market value. Quicken now is starting with Beg Market Val and comparing it to Ending Market Value + Fees added back in. I honestly do not believe the calculation makes any sense. At a minimum Quicken should allow user to run the report to show Performance Net of Fees or Expenses.

unknown

I understand what you are saying, but I'm looking at it differently. The stock (actually Money Market shares) was sold at the same price the shares were purchased (in this case $1/share). There is no gain. The money raised is simply done to produce cash to pay for the administrative fee. I think the only performance measure that is helpful is:

Beginning Market Value
+ realized gains
+ unrealized gains
- realized losses
- unrealized losses
- fees deducted from the account

This should equal ending market value. Quicken now is starting with Beg Market Val and comparing it to Ending Market Value + Fees added back in. I honestly do not believe the calculation makes any sense. At a minimum Quicken should allow user to run the report to show Performance Net of Fees or Expenses.

If you want that to occur, you'll need an Excel spreadsheet...because that's NOT how Quicken calculates that.

unknown

I understand what you are saying, but I'm looking at it differently. The stock (actually Money Market shares) was sold at the same price the shares were purchased (in this case $1/share). There is no gain. The money raised is simply done to produce cash to pay for the administrative fee. I think the only performance measure that is helpful is:

Beginning Market Value
+ realized gains
+ unrealized gains
- realized losses
- unrealized losses
- fees deducted from the account

This should equal ending market value. Quicken now is starting with Beg Market Val and comparing it to Ending Market Value + Fees added back in. I honestly do not believe the calculation makes any sense. At a minimum Quicken should allow user to run the report to show Performance Net of Fees or Expenses.

It may not be the way Quicken calculates it, but you have to admit that the ONLY thing investors should want to know is performance net of fees. After the all, the money you have is the net, not the gross.

q_lurker

I understand what you are saying, but I'm looking at it differently. The stock (actually Money Market shares) was sold at the same price the shares were purchased (in this case $1/share). There is no gain. The money raised is simply done to produce cash to pay for the administrative fee. I think the only performance measure that is helpful is:

Beginning Market Value
+ realized gains
+ unrealized gains
- realized losses
- unrealized losses
- fees deducted from the account

This should equal ending market value. Quicken now is starting with Beg Market Val and comparing it to Ending Market Value + Fees added back in. I honestly do not believe the calculation makes any sense. At a minimum Quicken should allow user to run the report to show Performance Net of Fees or Expenses.

Scott: You are omitting two other 'transactions'. Amounts you added to the account (to the Investments side), and amounts you withdrew from the account (to the returns side).

It is that amount withdrawn that is the real kicker, because Quicken is treating the Fee you paid as an amount withdrawn. The program does not particularly care whether you used that 'return' for an account fee or a trip to Fiji. It is money removed from the account so it is 'return'.

I and others have championed the basic idea that you should be able to have in internal 'fees paid' that would not be part of the average annual return calculation, but so far that concept has gone for naught.

So at this point, the options do seem to be -- export to Excel and recalculate there, or deduct the x% from the Quicken calculated value as an approximate net-of-fees value.

Jim_Harman

One way to get the Investment performance report to reflect more accurately what is going on would be to enter the fees as sales of 50 shares at $1.00 with a commission of $50.00. Then there is no cash left to withdraw. The fee is recorded as a Realized loss, which might cause problems in tax reporting if this is a taxable account.

unknown

This is the problem I have with Quicken. It is a great database, but the reporting functionality in many ways is poor.

unknown

I was looking for an answer to this problem and saw this post. I know this is an older post but hope this might help someone else looking to solve this problem. As I was reading through the potential solutions I came up with the following:

Set up a security called "CASH" valued at $1.00 per share. Use this security to track all your cash transactions. When you pay fees you can either "Sell" the security at $0/share or charge the full amount to Commission. I think I will use the Commission option as I could then run a report to see total commissions paid which is my investment advisor's fees. The only other cash transaction I have that creates a return is some nominal interest on cash balances in my accounts. I will use "Reinvested Interest" into the "CASH" security to track this and then this also goes into the total portfolio return calculations.

markus1957

@Jim_Harman ; said:

Investigating this further, it appears that this capability is already (somewhat) available in Quicken. If you record the management fees as MiscExp's and leave the security name blank. the fee is treated as a withdrawal as discussed above.

However, if you assign a security name in the MiscExp transaction and run the report on just that security, the fee appears in the Investment column of the Investment Performance Report, thus reducing the IRR of that security.

At the account level, the fee is now excluded from the report, resulting in the reduced overall performance for the account.

Adding- It Works!!!!!!!!!!!!!!!!!!!!!!!!!!
No extra steps other than creating a dummy "zInvestment Fees" security with zero shares and a price of zero. The "z" makes it easy to find in the pull-down when editing the downloaded transaction to make it a MiscExp. I had also created an "Inv Mgmt Fee" Investment Type to allow easier report customization but I'm not sure I would need to do that now.