Y/E Distributions and gain/loss accuracy

jsaldutti

Confused which "Displayed Column" should be used for an accurate return figure. I don't understand how I end up with the same value (More shares/lower price) yet Quicken thinks I am losing money since the quote is less than the average cost.

Jim_Harman

IMO Quicken's most useful performance metrics are the Avg. Annual Return (%) columns in the Investing > Portfolio views. The calculations behind these numbers are the same as those used in the Investing Performance Report (IPR). The calculation is an Internal Rate of Return or IRR. It includes the impact of any Buys and Sells during the period and also any distributions, whether reinvested or received in cash.

This is essentially the interest rate a savings account with daily compounding would need to have to match the performance of the security or account given the same cash flows. It matches what sites like Morningstar report as the "Total Return." It is also the same calculation that Excel's XIRR function uses.

Note that this is an annualized rate of return. For periods of less than 1 year, it assumes that the results over the analysis period will continue at the same rate for a full year.

q_lurker

I don't understand how I end up with the same value (More shares/lower price) yet Quicken thinks I am losing money since the quote is less than the average cost.

Gain/Loss will always show a down-tick when distributions are made.  

Before those distributions, you might be looking are a very positive gain figure.  At that point, it is a paper gain.  It is unrealized, meaning you have not turned that gain into cash.  The fund has accrued over the year dividend and gains and losses from the fund's investment. 

The distribution (either dividend, short term gain, or long term gain) turns some of that unrealized (paper) gain into real cash.  That reduces the prior day's unrealized gain to a lesser figure, possibly even into a loss.  The reinvestment is then using that cash to buy new shares at that day's closing value.     

So before the distribution you have value that include accumulated dividends and gains.
After the distribution, you have a lesser value and you have cash.
After the reinvestment, you are back to the prior value level in the form of more shares at a lesser price (not considering the daily price fluctuation. 
What had been a larger unrealized gain is now realized income (dividends and gains) and a lesser unrealized gain (or maybe an unrealized loss). 

I agree with Jim that Average Annual Return is a better measure of performance than gain/loss.