3 & 5 Year Average Annual IRR Calculations

Boatnmaniac

When I had Quicken 2016 (and with earlier versions) and there was insufficient historical securities holdings data to calculate the average annual 3-yr and 5-yr IRR's, Quicken would show "N/A" in those columns in the Portfolio view.  That was logical and not confusing. 

When I upgraded to subscription a little over a year ago I noticed Quicken now shows the 1-yr IRR number in those 3-yr and 5-yr columns. 

It is not only confusing to do that but it contradicts what Quicken Help says should be shown there (Quicken Help indicates it should show "N/A").  I've seen several users make similar comments in Community so I know it's not just me that finds this frustrating.

Can we get this fixed so "N/A" shows up, again?

Boatnmaniac

I should have also noted that when there is enough data to calculate the 3-yr annual avg IRR but not enough to calculate the 5-yr annual avg IRR Quicken will simply roll forward the 3-yr IRR number into the 5-yr column instead of putting "N/A" there.  This requested fix should also be applied to this scenario, too.

Mike Craig

This is exactly my experience. Quicken 2017 did not return results for which the time period did not exist.

Boatnmaniac

Mike Craig - If you want this changed, please use the voting button above.  The more people who vote for it, the more likely Quicken will address it.

Quicken Anja

Hello All,

The Community Support team regularly reviews long-standing posts and Ideas for relevancy and current interest. This Idea seems to have stalled and we would like to gauge the current interest in this request. 

If you would like to see this idea implemented, please add your vote and a comment explaining how this idea would be beneficial for you. More information, including steps to vote and how to submit your own Ideas for future product features/improvements, is also available here.

Thank you,

Quicken Community Support Team

Jim_Harman

The current behavior, where the the performance for securities that have been held for less than the full period is calculated and displayed is technically correct for an IRR, but it is very confusing. I think Quicken should change back to the pre-2017 behavior of displaying N/A in this situation. 

Boatnmaniac

For some reason I seem to recall that at some point in the last year Quicken had changed back to the "N/A" displays but it only lasted for a short time.  I remember thinking at the time, "This is great!".  At any rate, I do agree that the current behavior is confusing and others have posted as much.  Quicken should be making financials easier to understand and less confusing, not more confusing.

Scrappydoo

Agree with IRR comments...it is unecessarily confusing as it is today.

q_lurker

Boatnmaniac said:

When I had Quicken 2016 (and with earlier versions) and there was insufficient historical securities holdings data to calculate the average annual 3-yr and 5-yr IRR's, Quicken would show "N/A" in those columns in the Portfolio view.  That was logical and not confusing. 

When I upgraded to subscription a little over a year ago I noticed Quicken now shows the 1-yr IRR number in those 3-yr and 5-yr columns. 

It is not only confusing to do that but it contradicts what Quicken Help says should be shown there (Quicken Help indicates it should show "N/A").  I've seen several users make similar comments in Community so I know it's not just me that finds this frustrating.

Can we get this fixed so "N/A" shows up, again?

After review, I am going to take a stance AGAINST this proposal on rather simple grounds -- the math is now correct.  While my review has been substantial using Excel as a baseline and processing various forms of the IRR (Internal Rate of Return aka in Quicken as Average Annual Return), for this comment I will stick to verbal explanations.  

Consider this hypothetical -- User has no holding in a security in year one. Year two user invests $1,000 and sells it off for $1,060 at beginning of year three.  Year three he has no investment in the security.  What is his three year IRR?  That question is asking (effectively) -- What rate of return can I compound a negative cash flow of $1000 and a positive cash flow of $1060 and $0 for other periods and have them all balance out?  Mathematically we have,

+ $0 / (1+rate) ^0
- $1000 / (1+rate)^1
+$1060 / (1+rate)^2
+ $0 / (1+rate)^3
 
What 'rate' makes those total to zero? 

The answer is 6%.  It is not that you made 6% on $1000 over a 3 year period (suggesting something like 2%).  That same answer applies for just the middle one year period or that middle year plus either the beginning or ending $0 periods.  The $0 investment periods don't matter for the IRR calculation - neither early periods, later periods, nor intermediate periods.

So when Quicken is showing the same value for 5-year and 3-year because you did not own the security in that initial two year period, that is the correct math.  Sticking a NA in there is mathematically wrong; there is nothing 'not applicable' about the math.  There may be a case for reminding the user that the security was not owned in the beginning of the period, but are you going to similarly warn about not owning it at the end of the period, or for some intermediate period during the longer term?

I agree with respect to Help being wrong and it should be corrected.  The 'fix' for users being confused is education rather than avoiding the truth with NAs.  That too can be addressed in the Help information.