Amount Invested is over-stated

r.schwartz

I transferred a large sum of money to one of my investment accounts. I then transferred some of the funds to a second account. The second transaction (for some of the funds) was downloaded and showed as a "cash transferred out of account"

The first investment account still shows the large sum amount. It did not decrease by the amount transferred out.

How do I fix this? The amount invested should be the difference between the original transfer and amount moved to the second account.

r.schwartz

Thank you once again. Lots of good information, but unfortunately, it looks like I can't do what I want with Quicken, so I'll consider this item closed following my response.

To me, amount invested should be simple. Total Invested = Deposits - withdrawals. And yes, I understand that there could be transactions that might come from another account, such as taxes, but I can add or remove funds to update the amount invested to reflect these external charges. This exercise is with an IRA account. So all I really care about is what is the return I'm getting on my investments year-over-year.

I will solve my problem by not making further deposits in to these accounts. That way I know my "amount invested" and I can simply look at the balance or account value at any point in time to understand my "real" return, which will reflect the fees for the service.

And yes, I have my own investment account that I will use as a comparison. This entire exercise was to determine if a financial management company makes better financial decisions than I do.

As far as using Quicken, I use it to insure my financial transactions are accurate. Over the years, I have identified and corrected a number of transactions that were posted with different amounts than I had signed for - typically credit card transactions. I really don't want to trust any financial institution to tell me my balance. Quicken has some challenges, but it is really good at the transaction level.

Mark1104

go to the 1st account and create a 'XOUT' transaction for the amount of money transferred to the 2nd account.  You will be asked for the 'transfer account'; enter the name of the 2nd investment account.  That will transfer the cash from the 1st account to the 2nd account.

I was a little confused by you comment about the "2nd transaction".  If that is in the 1st account, delete it (after following my suggestion above).  if that is in the 2nd account, I am surprised it is not a 'transfer in' transaction. 

The words 'account' and 'transaction' have different meaning in Quicken. 

Chris_QPW

Was this done with cash transfers or did it involve securities?
I tried this with cash and it seems to be fine.

Starting:


Transfer $100,000 in (Cash Transferred into Account):


Transfer $50,000 out (Cash Transferred out of Account):

r.schwartz

Both transactions/transfers were in cash:

First transaction/transfer was recorded as "deposit" in account "A". The category was another account (not "A" or "B") listed in Quicken (I'll use $600 as an example)

There was some stocks "bought" and "sold", prior to what I'm calling the second transactions.

Second transaction/transfer from "A" to "B" was recorded as "cash transferred out of account" in "A" and "cash transferred into account" in account "B". There is no category listed, just the other Quicken account. (I'll use $500 as an example). At this point, balance in :"A" is $100, balance in "B" is $500

I would expect account "A" to show an amount invested as $100 - It shows $600

To clarify, when I refer to "Amount Invested", I'm referring to the Investing, Portfolio (tab) report

Mark1104

I am not totally following what you wrote, but let's simplify the conversation by me stating:

1) if you are comfortable the investments in the securities are properly stated (your buys and sells), then let's not discuss 'buys' and 'sells' as that just confuses the conversation.  The focus is the cash movement. 

2) how much was the deposit into Account A? if this money came from another account (say your checking account), it should be a "Xin" transaction in Account A and it'll show as a 'Xout" transaction in the checking account.  I'd make sure that is correct first.  If the money can from a different account but is just a 'deposit' in Account A, that is the issue. 

3) sounds like the transfer from Account A to Account B is correct from the way you are describing as you see the correct balance in Account B. 


  

r.schwartz

The money DID come from another investment account. So - I edited the (first) transaction by changing the "Enter Transaction" field from "Deposit" to "Cash transferred into account". The "Action" field displays as "ContribX" and the "Invested Amount" did not change. If I manually type Xin in the "Action" field, the action field changes to "Deposit".

If it matters, the stock bought and sold was a money market fund. The bought was $600. The sold was $500. Both had "to the accounts cash balance" checked. I'm thinking about deleting the "sold" transaction and adjusting the bought transaction to $100. The net would be the same.

r.schwartz

I also ran validate and super-validate to see if there was an internal problem. No change.

Mark1104

when moving cash between investment accounts, suggest using the 'Xin' "Xout" transaction types.  It appears that is what you are doing.

But a Money Market fund is just like any other ETF or Mutual Fund, so if you use the "buy" and "sell" actions you should see the cash balance IN THAT ACCOUNT change by a like amount....checking 'to the accounts cash balance' is correct 

does that help? 

q_lurker

"Amount Invested" in Quicken is an easily misunderstood parameter.  Essentially, it is what you have put into (invested in) any one security (including MM funds) over the life of that investment.  It is on a security basis, not an account basis.

Say you invest $1000 in Apple in 2010.  You later sell off 1/2 those shares taking a well earned profit before a dip.  At the bottom of the dip you buy another $1000 of shares.  Your Amount Invested for Quicken's purposes is $2000.  Over time, you have gotten dividends and the "profit' (realized capital gain) from the sale based on your total investment of the $2000.  

Quicken is NOT saying that $2000 was the Amount Invested to acquire the current holding of those shares. 

If you sell all the shares, Quicken MAY reset the counter.  It is supposed to, but I have seen variations in that behavior over a variety of program releases.

Amount Invested will also vary with the starting date.  If you ask for the information to begin 1/1/21, the Amount Invested should be the value of that security in your holdings as of the day before (12/31/2020) plus any subsequent purchases.  That is essentially saying at the end of the day (12/31) you chose to continue with that investment.  In making that decision to continue, you invested that amount on that date.

Hope this clarifies what you are seeing.

Chris_QPW

Note the field I showed was for the account, and as such showed what is done for cash.  The moment you buy a security, any security, it gets much more complicated.  As @q_lurker pointed out.  And as far as I have seen Quicken never resets the value for that account/security.

r.schwartz

What I'm hearing is that "Amount Investment" is a summary of all stock purchases (with no regards to sales). If that's the case, it's a worthless field to me. Does anyone know where to get a detailed explanation of "Amount Invested" and the other fields as well?

Jim_Harman

IMO Quicken's "Amount Invested" is useful mainly as a component of other performance metrics and not by itself.

There are several places that have (sometimes contradictory) definitions of the fields. The most authoritative appears to be in the Help, but with the new Help system it is maddeningly hard to find.

Using the tree on the left in Help, click on Invest for the future then scroll down to About monitoring portfolio performance then click on Tell me about key investment performance calculations.

q_lurker

@Jim_Harman's lead will get you to this statement:

Amount invested doesn't decrease when you sell shares (unless you sell all shares of a given security—then it goes to zero), whereas cost basis does. If calculations such as ROI appear lower than you would expect, it could be because the amount invested includes the cost of shares you no longer own.

In my experience, the first part is correct (Amount invested doesn't decrease when you sell shares).  That is what I stated to you earlier which I believe you interpreted correctly.
 
The parenthetical statement is inconsistent [(unless you sell all shares of a given security—then it goes to zero)].  I believe I have seen it work that way in some cases, but not all.  Chris indicated he had not seen such a 'reset'.  

The last statement is also consistent with what I suggested (the amount invested includes the cost of shares you no longer own.)

Elsewhere in that discussion about Amount Invested is this statement:

When you change the Portfolio date range, Quicken calculates the amount invested during that period to be the difference between the beginning amount and ending amount of the date range:

That is inaccurate.  Amount Invested is not the difference in those two values.  Amount Invested is closer to what is subsequently defined as "Beginning Amount".

• Beginning amount: For shares purchased before the beginning date, Quicken uses the market value on the beginning date. For shares purchased after the beginning date but before the ending date, Quicken uses the actual cost of those shares.

For shares "Added" rather than bought, the impact on Amount Invested seems to be that the cost basis of those added shares is added to the Amount Invested total.  

Chris_QPW

r.schwartz said:

What I'm hearing is that "Amount Investment" is a summary of all stock purchases (with no regards to sales). If that's the case, it's a worthless field to me. Does anyone know where to get a detailed explanation of "Amount Invested" and the other fields as well?

Personally I never look at "Amount Invested" like @Jim_Harman said it more used for other metric calculations, but note it depends on where you look at it, of what it is.



Top number is for the account, then there is one for each security.
Transferring $100,000 in, note the Cash line comes up, but has nothing in it.


In this case if I transfer the $100,000 it will go back down to $46,377.46.

But the "resetting" is about what happens on buy/sell.
After Buy.

After sell:


Notice that VMFXX didn't go down.  And it will never go down for a sell for VMFXX in this account.

Transfer the cash out.


So my interpretation of this that even though people tend to think of this value as "the money I currently have invested", in reality it is "the total money that I have ever invested in this security".

r.schwartz

Maybe I should have asked the question this way.......

I have turned over funds to a financial management company to manage for me. I'd like to know my total investments and the current value of my portfolio. I really don't care what has been bought or sold. Basically, what did I put in to this program and what is it worth?

It would be great if their management fees were simply a deduction from my current value. But I could make that calculation manually if Quicken could accurately track my investments (Deposits).

Is this possible with Quicken?


AND thank yo all for trying to help!

Chris_QPW

It will be interesting to see if anyone can come up with a way to do this in Quicken, but "return" is calculated so many different ways that getting a value in Quicken that will agree with any given financial management company seems next to impossible to me.  When you are trading in and out of securities how you should treat that gets really complicated quickly.

I personally sort of look at the numbers in Quicken to make sure that I don't have real "stinkers", but in general I don't judge the overall results using any of the "investment calculations".  I use a much simpler metrics, net worth/account balance.  How much did it go up or down in a given period of time.

q_lurker

r.schwartz said:

Maybe I should have asked the question this way.......

I have turned over funds to a financial management company to manage for me. I'd like to know my total investments and the current value of my portfolio. I really don't care what has been bought or sold. Basically, what did I put in to this program and what is it worth?

It would be great if their management fees were simply a deduction from my current value. But I could make that calculation manually if Quicken could accurately track my investments (Deposits).

Is this possible with Quicken?


AND thank yo all for trying to help!

You may want to investigate the "Simple Investing" approach within Quicken for these accounts.  It is a relatively new methodology (maybe a year old) that I have no experience with.  The premise is to track positions only, not transactions.  Start by enabling it through the Edit / Preferences / Investment Transactions checkbox.        

Jim_Harman

Once Simple investing has been enabled, you need to turn it on by clicking on the gear at the top right of the account and choosing the option in Edit Account Details.

Note that once you have enabled Simple investing, it may be difficult to reconstruct all the transaction details if you want to switch back later on. Be sure to make a backup of your data file before switching modes so you can revert if you change your mind later. 

Mark1104

I think this is rather easy.  Look at Reports>Investing>investment performance.  That report is solely based on cash invested, cash removed and current value of the investment.  It is the performance of a security or group of securities.....does that work for you? 

you can sort the report different ways and include / exclude accounts, securities etc. 

The result is 'funky' if you choose a period of less than a year to analyze as it reports on an annualized basis, so if you want to look at 2021 performance, be sure to customize so the end date is 12/31/21. 

Chris_QPW

Mark1104 said:

I think this is rather easy.  Look at Reports>Investing>investment performance.  That report is solely based on cash invested, cash removed and current value of the investment.  It is the performance of a security or group of securities.....does that work for you? 

This is in fact the report I use to see if I have any "stinkers".

I think whether this report can be used depends on the goals set.  What it won't do.

1. Match the performance the broker give.
2. Only include the "new money" invested.  As in the investment column is going to include reinvestment amounts.

Simple investment view is going to be missing "how much is invested".


I think fundamentally the problem is that what sounds like a simple question turns out to be very complicated in practice.

The basic question is "What did I get in return for my money?"

If I take the simplest example and treat the portfolio as a black box it is the current value divided by the amount of money transferred into the account.  As in, I put in $10,000 and it now worth $20,000, I made 100% profit.  But it gets more complicated since if I put in $10,000 ten years ago then I still made 100% profit, but that would be quite different than putting in $10,000 on year ago and the current value is $20,000.

Then were it gets really complicated is what if I put in $1,000 each year, and now I have $20,000?
I made much more than the case where I put in $10,000 ten years ago and did nothing.  This isn't even getting to the complications of if you withdrew some of the money.

If you have to simplest case where you just put in one lump sum, you can get a report of what was transferred in, and to the simple calculation, but I doubt you will find that you have such a simple case.

The problem is that the original question is actually fundamentally wrong.  It doesn't take into account these real world situations.  That is why there are the complicated calculations for taking into account how long any given money is in the security and such.

Chris_QPW

Actually change that a bit, what I meant to say is it sounds like a easy calculation when in fact it isn't.

Also I think the real question here is "Is investing with this financial advisor a good idea?".

And for that I believe the only way would be to compare doing something else, not just look at some percentage number.  As in, If all I did was put $10,000 in both say VTI and gave $10,000 to this advisor for a period of time, which would actually have a better return?

Mark1104

if you are paying a management fee, why aren't THEY answering your question? Why even use Quicken???????

why can't the management company tell you what you invested and what the investments are worth?  

r.schwartz

Thank you once again. Lots of good information, but unfortunately, it looks like I can't do what I want with Quicken, so I'll consider this item closed following my response.

To me, amount invested should be simple. Total Invested = Deposits - withdrawals. And yes, I understand that there could be transactions that might come from another account, such as taxes, but I can add or remove funds to update the amount invested to reflect these external charges. This exercise is with an IRA account. So all I really care about is what is the return I'm getting on my investments year-over-year.

I will solve my problem by not making further deposits in to these accounts. That way I know my "amount invested" and I can simply look at the balance or account value at any point in time to understand my "real" return, which will reflect the fees for the service.

And yes, I have my own investment account that I will use as a comparison. This entire exercise was to determine if a financial management company makes better financial decisions than I do.

As far as using Quicken, I use it to insure my financial transactions are accurate. Over the years, I have identified and corrected a number of transactions that were posted with different amounts than I had signed for - typically credit card transactions. I really don't want to trust any financial institution to tell me my balance. Quicken has some challenges, but it is really good at the transaction level.

Mark1104

<<And yes, I have my own investment account that I will use as a comparison. This entire exercise was to determine if a financial management company makes better financial decisions than I do.>>

that is what the Investment Performance Report does..... For a few years I let my broker manage one account and I managed a separate one ... I used this report to see who did better.   As stated above the report calculates the IRR (called ARR in Quicken) and I have confirmed it separately using EXCEL,

the report is deposits less withdrawals ...the last line is market value.

Chris_QPW

In my opinion once you say that you're going to compare two accounts trackd in Quicken where you supply them both with the same amount of money at the same time then it becomes pretty much trivial.

You can basically use either the final amount in each account or ARR or IRR or whatever as long as you're comparing the same thing then you can pretty much easily see when one performs better than the other or if they're about the same.

I think the rest of the thread was more about the complications of trying to match Quicken calculates to what may be the fund manager would tell you.