Mutual fund short term performance shows negative after capital gains reinvestment

Charlie@

So every December when the Mutual Funds declare their Dividends/Cap Gains, the various fund's [Portfolio View] short term performance shows incorrectly low - or even negative.  I assume this is because Q is only looking at the per share price, but it really doesn't give me a good picture of the fund's recent performance.  Is this assessment correct, and is there another mechanism that will show me the correct short term performance? (Or do I have to wait 3 months until the share price drop ages out?)
Thanks!

This is QD16, Version 14.1, Windows 10.  Will go to QD18 soon (I hope...)

Jim_Harman

Which column(s) are you looking at in the Portfolio view?

It appears that the Gain/Loss % columns just look at the share price, and do not include any distributions.

The Avg. Annual Return columns show the total return (IRR) of your holdings. This includes Buys, Sells, and distributions.

The Return % columns show the total return of your holdings as reported by Quicken's quote provider. This assumes no Buys or Sells during the period and distributions reinvested.

There is a pretty good description of these headings in the Quicken Help glossary.

q_lurker

Jim Harman said:

Which column(s) are you looking at in the Portfolio view?

It appears that the Gain/Loss % columns just look at the share price, and do not include any distributions.

The Avg. Annual Return columns show the total return (IRR) of your holdings. This includes Buys, Sells, and distributions.

The Return % columns show the total return of your holdings as reported by Quicken's quote provider. This assumes no Buys or Sells during the period and distributions reinvested.

There is a pretty good description of these headings in the Quicken Help glossary.

The OP referenced "Short term performance".  I'll interpret that to mean the off-the-shelf, Recent Performance view of a Portfolio view that includes only Gain/Loss data in dollars and percentages for overall, and 1-month, and as percentages only for 3-month, 12-month periods.  Of course, other fields could also have been added to the view, or another customized view created.  

It appears that the Gain/Loss % columns just look at the share price, and do not include any distributions.

The Avg. Annual Return columns show the total return (IRR) of your holdings. This includes Buys, Sells, and distributions.

Agreed on both counts.

The Return % columns show the total return of your holdings as reported by Quicken's quote provider. This assumes no Buys or Sells during the period and distributions reinvested.

I believe the quote/data supplier only provides the Return YTD% as a fixed value.  The other Return % values are computed from the users data subject to the applicable definition:

Return 1/3/5-Year (Portfolio columns)

Market value plus cash income plus sale income minus dollars
invested for the specified time period.

Percentage values are then computed from those Returns.  As best I recall off the top, these are subject to the As of data for the view whereas Return% YTD is not. 

Bottom line is to understand what is the applicable definition for the data being presented.    

Unknown

Back in the dark ages when I first started  using Quicken I noticed that Q reported a different value for gain/loss than my broker.  I looked into it and diagnosed that Q seemed to look at the gain/loss most pessimistically,  My broker reported them most optimistically.

I thought about it and was reminded of the old saying "Figures don't lie but liars figure".  I decided that I should pay attention to both.   Consider the mutual fund FLPSX.  My broker says the gain is 643.51% Q says 27.25%.  I have owned FLPSX since 2004 reinvesting all dividends and Capital gains. the explanation of the difference is left to the student.

Jim_Harman

Kayo said:

Back in the dark ages when I first started  using Quicken I noticed that Q reported a different value for gain/loss than my broker.  I looked into it and diagnosed that Q seemed to look at the gain/loss most pessimistically,  My broker reported them most optimistically.

I thought about it and was reminded of the old saying "Figures don't lie but liars figure".  I decided that I should pay attention to both.   Consider the mutual fund FLPSX.  My broker says the gain is 643.51% Q says 27.25%.  I have owned FLPSX since 2004 reinvesting all dividends and Capital gains. the explanation of the difference is left to the student.

Is the broker reporting the total gain, not annualized, i.e. (value now)/(original value)?

There are certainly lots of ways of computing performance, depending on how you deal with additions, withdrawals, and distributions, and whether or not you annualize the figures.

IRR, what Quicken calls "Avg. Annual Return" is a pretty good standardized way of reducing your personal performance to a single number, but it does not tell you anything about volatility and the results can be confusing for periods of less than one year.

Charlie@

Thanks for all the responses.  Yes, I understand IRR and the % Return and the Return columns, but I like to look at the Gain/Loss % columns for both 1 and 3 months because they can help to identify trends.  Only they are of no use from the December dividends until the end Jan/March respectively.

q_lurker

Charlie said:

Thanks for all the responses.  Yes, I understand IRR and the % Return and the Return columns, but I like to look at the Gain/Loss % columns for both 1 and 3 months because they can help to identify trends.  Only they are of no use from the December dividends until the end Jan/March respectively.

Looking at gain/loss is fine for what it is.

Day before distribution -- you have a certain gain/loss, an unrealized cap gain (or loss).

The MF makes the distributions, possibly LT Cap Gains, ST Cap Gains, and Dividends.  What was yesterday an unrealized cap gain has now been converted into some realized cap gain or into dividend income.  If they pay you $1/share as dividends, it is because yesterday, they were including in their valuation $1 of dividends.  They give the $1 to you and it is not in the next NAV.  As such your value per share in the fund has to drop and that is reflected in the next day's NAV or price quotes.  But that has nothing to do with the overall performance of the fund. 

If you choose to think of the gain/loss in the same context as the day before, you are missing what can be a significant consideration.  That is not Quicken showing data "incorrectly low - or even negative".  That is why gain/loss or gain/loss% is of limited value.  You may certainly use it if it identifies short-term trends for you.  

NAV (in my understanding)would be evaluated as 1) value of the company shares the fund currently owns, 2) the currently retained gains (or losses) the fund has incurred from selling shares of the companies it has owned, and 3) the currently retained dividends those companies have paid.  To my knowledge, there is no way to differentiate those components prior to those distributions.