Cost Basis versus Amount Invested

Question

I have a stock for years that has never paid a dividend but has been transferred to different brokerages and different accounts. The Cost Basis remains correct but the Amount Invested is much larger than the real amount. I believe the Cost Basis should equal the Amount Invested in this situation. Can anyone explain this situation?

Jim_Harman · Answer

Another take on the Amount Invested in the Investing > Portfolio views is that it is useful mainly as input to other calculations that Quicken is performing, particularly Return and ROI, which have problems of their own, as has been discussed elsewhere.

I agree with others that because it does not include reinvested dividends and does not decrease when you make a partial sale, Amount Invested is not particularly useful by itself. Because of this, I do not include that column in any of my portfolio views.

To add to the confusion, Amount Invested in the portfolio views is NOT the same as Amount Invested in the Investment Transaction report.

q_lurker · Answer

@vitretina You have hit on a particularly negative impact of the Amount Invested parameter.  In my mind it is a factor that can largely invalidate it use entirely.

As RJS noted, Amount Invested does not decrease as shares are sold.  That also applies to Shares Removed.  What is happening as you switch brokerages and transfer shares from one account to another is that you are building up a series of Add Shares transactions.  Even though these are in different accounts, for the security, they are treated cumulatively.  So if you initially invested $1000 in a security, then over time moved that to three other brokerages (four brokerages overall), Quicken is likely showing your Amount Invested for the security as $4,000 (maybe more).

I try to explain Quicken's approach to Amount invested as follows:  Suppose over time you buy and sell various amounts of Apple buying low and selling high (in a good world).  Quicken's number is telling you that over that time period, you invested the total amount of all those buys.  Your returns over that period were all the dividend you received and the amount of all the sales.  From that, Quicken can give you an assessment of how well you did with that security over that time period.

Quicken is NOT trying to tell you the amount you have invested in the CURRENT holding of those shares.  This is a definition that many users find frustrating or at least unexpected.

So in my example above, Quicken would be saying that 4 times you invested $1000 in that security.  In your type of case, that is factually inaccurate.

All in all, this is why I avoid consideration of Amount Invested and Quicken's related ROI%.  I much prefer Average Annual Return (and IRR calculation) that properly addresses both additions and withdrawals from the security / account / etc.  Average Annual Return is a parameter available through Portfolio Views (Ctrl-U) and the Investment Performance report.

Rocket J Squirrel · Answer

If you have sold any shares, Cost Basis declined and Amount Invested did not. This is documented behavior. Amount Invested only decreases in the special case that you sell all shares, then it goes to zero.