Why are SOLD/BOUGHT transactions not being included in Investment Performance report?

Stu

I ran the Investment Performance report for all my investment accounts for the past year. Selected all accounts and all securities and all security types. Then I ran a couple of other reports and came back to repeat the original with all the same variables. The 2nd time, there were no SOLD or BOUGHT transactions in the detail and when I reviewed again the first instance, there were several SOLD and BOUGHT transactions missing.
I went through all possible resets, including running custom dates for the same period; closing the report package; reopening and starting from scratch. The reports still do not show those transactions. I also saw that the original run of the report that did have some of the few SOLD transactions actually included the proceeds from the sale in the "investment" column - huh? I wonder what I'm doing wrong?

q_lurker

In the context of my prior post, going after all accounts at once is not particularly different than an individual account.

You have a universe of investments for which you are seeking a performance measure.  That universe can be defined as all your investments, all retirement accounts, any individual account, a group of securities, or any variety of ways.  That defined universe has a size at the start (1-, 3-, 5-, 10 years ago, whenever).  Over time you added to that universe with value that came from outside that universe (cash from a paycheck, transfer from one account outside to an IRA inside, etc.)  Over that same time, you also took value out (paid for kids college, bought a Ferrari, etc.)  At the end of that time, the universe had changed size due to both your additions and withdrawals and internal growth (or shrinkage) of the collection of assets in that defined universe.  Those four lead to the IRR calculation. 

When you exclude the cash from the universe (uncheck the No security (includes cash) box), turning a stock into cash takes value out of the defined universe (the universe gets smaller).  Conversely buying a new security (one that is in the defined universe) adds value (size) to the universe.  The cash was outside, now that value is inside.  So excluding cash makes those buys and sells additions to and removals from (investments and returns) that defined universe.  The transactions then appear in the Cash Flow detail for that report. 

(I have wanted to try out that 'universe' language for this type of explanation for some time.  I hope it makes sense.  Just keep in mind how flexible that defined universe might be -- anything from a single security to everything in your entire collection of investments.)   

Does this mean that any cash Deposits or Withdrawals are excluded from the first run, but included in the 2nd run? If so, does that mean the 2nd run is the more accurate IRR of all the activities in the accounts combined?

First Q, not really.  In the first run with the No Security box checked, the cash remains in the whole, in the universe you have defined for the computation.  Buying or selling within the whole does not of itself change the size. 

Is the value excluding the cash more accurate?  I would not judge it that way.  I did your two runs for an all-account universe with (run 1) and without (run 2) the cash for one select period.  The IRR value went up by 0.3% for that period when I excluded the cash (Run 2 shows a better return that Run 1).  Looking at the starting and ending market values, I see the Run 1 data with cash universe a bit bigger on both ends - at the start and at the end - as compared to the run 2 universe.  I effectively started and ended with the same size cash buffer/safety net for that period.  Both universes increased by the same dollar amount (effectively).  The cash did not contribute to any growth. 

Consider a hypothetical to parallel my example -- $1100 grew to $1300 or $1000 grew to $1200.  Both grew by $200.  The first had a $100 cash that did not contribute to growth. The second ignored that component.  The first increased 18.2%; the second 20%.   Which is more 'accurate'?  My answer - neither. Both are equally accurate, but represent different things.    

Now your numbers are undoubtedly different, but I would broadly expect that tendency to be evident.  (Having a cash buffer would normally lessen the highs and the lows).  If you timed the market well, the differential might be much better bigger than my 0.3% differential.  But that advances into a whole range of related questions - how long, how much out, back in when.  

Final Answer?  Run 1 might present your complete picture more fully.  Run 2 might present your security selection performance more accurately.

My kudos to you for experimenting in that fashion.  It is a great way to better understand not only what and how you are doing, but also what Quicken is telling you. 

Jim_Harman

I like your "universe" language. I like to think of the selections as drawing a line around the selected accounts and securities/cash. Only transactions that cross the line are shown in the IPR details.

Jim_Harman

[edited to clarify]

When the Investment Performance Report is subtotaled by account and you have included "No Secruity (includes cash)" in the securities, the detail correctly only shows cash flows into or out of the account. A Bought or Sold converts a security holding to or from Cash within the account and thus does not affect the details.

The effects of trading inside the account do affect the ending value, so the overall IRR will depend on how smart a trader you were! 

If you subtotal by Security, you will see all the Bought and Sold transactions.

q_lurker

Two factors can how the data is subtotaled for the calculation and how complete the data set is (all securities versus a subset of securities).  

For example, if the subtotalling by account, what matters is where the account started, where it ended, what you added in, and what you took out.  That you made a bunch of positive (or negative) trades, moved in and out of cash within the account at the right time (or the wrong time), those affect the ending value but not the internal rate of return computation (Average Annual Return).

If you subtotal by security, then each buy or sell of that security represents and addition to or withdrawal from that security's calculation.  The trades will show up in a report subtotaled that way. 

(The same rational applies to dividends the securities pay. Some subtotals will show those dividends, some won't).   

Stu

Thanks for your answers - they help me understand the report a little better. There are still issues I don't understand though.
I'm not looking for the IRR of individual positions and I'm not looking for the IRR of individual accounts, so the subtotal by security or account doesn't get me the answer I need. I'm looking for the combined IRR of all my accounts and securities as a single number for periods of time - 1-year; 3-years; 5-years and 10 years.
I ran the report again, including all accounts and securities but not the "No Security (includes cash)" box. As you say, this then shows all the SOLD and BOUGHT transactions and gives me a certain bottom line % number. If I run the same report but check the "No Security (Includes cash)" box, the displayed transactions only show the cash results of transactions but give me a different consolidated IRR %. Does this mean that any cash Deposits or Withdrawals are excluded from the first run, but included in the 2nd run? If so, does that mean the 2nd run is the more accurate IRR of all the activities in the accounts combined?

q_lurker

In the context of my prior post, going after all accounts at once is not particularly different than an individual account.

You have a universe of investments for which you are seeking a performance measure.  That universe can be defined as all your investments, all retirement accounts, any individual account, a group of securities, or any variety of ways.  That defined universe has a size at the start (1-, 3-, 5-, 10 years ago, whenever).  Over time you added to that universe with value that came from outside that universe (cash from a paycheck, transfer from one account outside to an IRA inside, etc.)  Over that same time, you also took value out (paid for kids college, bought a Ferrari, etc.)  At the end of that time, the universe had changed size due to both your additions and withdrawals and internal growth (or shrinkage) of the collection of assets in that defined universe.  Those four lead to the IRR calculation. 

When you exclude the cash from the universe (uncheck the No security (includes cash) box), turning a stock into cash takes value out of the defined universe (the universe gets smaller).  Conversely buying a new security (one that is in the defined universe) adds value (size) to the universe.  The cash was outside, now that value is inside.  So excluding cash makes those buys and sells additions to and removals from (investments and returns) that defined universe.  The transactions then appear in the Cash Flow detail for that report. 

(I have wanted to try out that 'universe' language for this type of explanation for some time.  I hope it makes sense.  Just keep in mind how flexible that defined universe might be -- anything from a single security to everything in your entire collection of investments.)   

Does this mean that any cash Deposits or Withdrawals are excluded from the first run, but included in the 2nd run? If so, does that mean the 2nd run is the more accurate IRR of all the activities in the accounts combined?

First Q, not really.  In the first run with the No Security box checked, the cash remains in the whole, in the universe you have defined for the computation.  Buying or selling within the whole does not of itself change the size. 

Is the value excluding the cash more accurate?  I would not judge it that way.  I did your two runs for an all-account universe with (run 1) and without (run 2) the cash for one select period.  The IRR value went up by 0.3% for that period when I excluded the cash (Run 2 shows a better return that Run 1).  Looking at the starting and ending market values, I see the Run 1 data with cash universe a bit bigger on both ends - at the start and at the end - as compared to the run 2 universe.  I effectively started and ended with the same size cash buffer/safety net for that period.  Both universes increased by the same dollar amount (effectively).  The cash did not contribute to any growth. 

Consider a hypothetical to parallel my example -- $1100 grew to $1300 or $1000 grew to $1200.  Both grew by $200.  The first had a $100 cash that did not contribute to growth. The second ignored that component.  The first increased 18.2%; the second 20%.   Which is more 'accurate'?  My answer - neither. Both are equally accurate, but represent different things.    

Now your numbers are undoubtedly different, but I would broadly expect that tendency to be evident.  (Having a cash buffer would normally lessen the highs and the lows).  If you timed the market well, the differential might be much better bigger than my 0.3% differential.  But that advances into a whole range of related questions - how long, how much out, back in when.  

Final Answer?  Run 1 might present your complete picture more fully.  Run 2 might present your security selection performance more accurately.

My kudos to you for experimenting in that fashion.  It is a great way to better understand not only what and how you are doing, but also what Quicken is telling you. 

Jim_Harman

I like your "universe" language. I like to think of the selections as drawing a line around the selected accounts and securities/cash. Only transactions that cross the line are shown in the IPR details.

Jim_Harman

Or to be more specific, the transactions that are inside the line are the intersection of the date range, the selected accounts, and the selected securities (remember Venn diagrams?)

The calculation assumes that the selected holdings were transferred in on the starting date using the closing prices from the previous day and transferred out on the ending date, using the closing prices for that day.

Stu

Thanks so much to both of you for your descriptions of the situation; they explain it clearly to me. I also like the concept of the investment universe, but I have a slight twist on it. To me, any cash that crosses the boundary of my investment accounts does not contribute to the IRR of the account. However, once inside, the cash is just another asset class and therefore subject to the judgment and results of investment decisions.

On a grander scale, the quoted performance of mutual funds and ETFs presumably includes any dormant cash inside the envelope of funds available for investment. I assume that the quoted performance of these funds encapsulates dormant cash as much as it does the active equity and bond investments made. I also presume that public reports of annual and multiyear performance make the same assumption. Clearly, if a mutual fund excluded the cash inside its fund from its performance reports, the reader would be misled as to the investment decisions.

All I had wanted to do originally is to compare my own personal performance with the published performance of some mutual funds. To do that, I feel I must consider any cash inside the universe (envelope, or account) as an asset class subject to my investment decisions, but I must exclude all the cross border cash movement.

Thanks again - very helpful. In future I will run the report with the "No security (includes cash)" box checked. In my case it reduces the 2020 1-year IRR by 0.97%. (I'm still ahead of my 'benchmark' mutual funds!!).

q_lurker

Stu said:

...

On a grander scale, the quoted performance of mutual funds and ETFs presumably includes any dormant cash inside the envelope of funds available for investment. I assume that the quoted performance of these funds encapsulates dormant cash as much as it does the active equity and bond investments made. I also presume that public reports of annual and multiyear performance make the same assumption. Clearly, if a mutual fund excluded the cash inside its fund from its performance reports, the reader would be misled as to the investment decisions.
...

Thanks again - very helpful. In future I will run the report with the "No security (includes cash)" box checked. In my case it reduces the 2020 1-year IRR by 0.97%. (I'm still ahead of my 'benchmark' mutual funds!!).

With the understanding (my understanding) that the MF/ETF managers are generally unlikely to have extended periods with 'dormant cash', I think your comments are on target.  Whatever dormant cash they do hold from time to time should be included (I believe is included) in their numbers.  And the most comparable number available from Quicken (I suspect) is the IRR with the 'No Security (cash included)' box checked. 

Even at that, it still is beneficial to be as confident as possible of an apples to apples comparison.  For example, I can generate a IPR subtotaled by security including a number of accounts that are rather statically invested.  Those accounts tend to have mutual funds or ETFs  The IPR average annual return results are usually comparable to published results for those funds/ETFs.  Where there are differences, I can usually also see trading of those funds can be a factor.  That give me comfort that other investments in those accounts are being reported reliably and thus the report for the whole account should also be credible.       

If you come out of that beating your target benchmark CONSISTENTLY, you are doing good (or choosing the wrong benchmark). 

Along that line, having the full understanding also assists in evaluating you chosen portfolio balance.  Your equity selection beats your stock benchmark, but what is your 50/50 equity/fixed income costing you - 1-year, or 10 years?  You can at least get a feel for that by understanding the numbers.  

Pensionman

Can I check mutual fund performance with the quicken that I have ?
Do I need to upgrade to check mutual fund performance ?

Jim_Harman

Pensionman said:

Can I check mutual fund performance with the quicken that I have ?
Do I need to upgrade to check mutual fund performance ?

You need Deluxe or higher to check investment performance.