Investment Performance Report

jsaldutti

When I run this report the "Investments" column matches exactly. Both mutual fund purchase downloaded from my ADP 401k is there. Under the "Returns" column every sale is also list accurately. Where I am confused is the "Average Annual Return" column is negative. The NAV went down by $3 due to a distribution of $25K. When I add this $25k to the Investments, it exceeds the returns. How can this be negative? Comparing a buy NAV of 24.79 and a current NAV of $21.70 seems to ignore the $3 distribution

Jim_Harman

It is hard to tell from your description exactly what happened.

Was the distribution a capital gains distribution from the fund that remained in the account, or was it distributed to you or reinvested?

Also you may see different results based on how you subtotal the report - by account or by security. In a situation where any returns remained in the account, either in cash or reinvested, it is usually most useful to subtotal by account. 

And remember that the Average Annual Return is an annualized number, which may lead to unexpected results for time periods of less than one year, especially YTD early in the year.

q_lurker

Generally speaking, the effect of the distribution is shown as either an entry in the Returns column (if the amount is taken out of the scope of the report), or as an increase in the End Mkt Value.  So the $25K is (should be) factored in.  That the final Avg Ann Return comes in as a negative suggests the price drop after the distribution and and overall throughout the rest of the year was more than the distribution value.  The magnitude of the Avg Annual Return number can be over-stated if the holdings are shorter-term.  

If you would care to name the funds, we might be able to present a more detailed response.      

jsaldutti

The fund is TRRBX and I show the total distribution (Dic, ST & LT) being $2.884. In early December, I made one purchase at $24.79 and one at $24.51. On 12/21 the distribution was paid out and the $25k was reinvested. After the distribution, I sold several times all of $21.72 The report was run only with the selected fund and not subtotaled. I can understand if the negative is being driven on an annual basis for a fund only held for a matter of weeks but I am still confused why the $25K is not shown on the report.

NotACPA

I'm confused.  You state "total distribution ... being $2,884", but then you also state $25K reinvested.

Where did the difference between $25K and ~$2.8k come from?

jsaldutti

$2.884 (.379 + .385 + 2.12) is the total share distribution.
$25271.(1179 shares @ $21.44) on the distribution day

Tom Young

The calculation of the IRR on the Investment Performance Report is a function of opening balances, cash flows, ending balances, and a function of time.  You really haven't explained the cash flows clearly and the time period hasn't been mentioned at all.  There's no way anybody can give even an approximation of a definite answer.

Your last sentence seems clear enough.  You bought at $24.79, you got a $3 distribution which leaves you with a basis of $21.79, and now the fund is worth $21.70, less than you basis.  Without knowing the date of the purchase, the date of the distribution and the date of the final valuation I can't tell you exactly what the investment performance calculates out to, but I can tell you that it's a negative number.

bellbill

Before your post, I thought that knew a little about investing. Really can’t understand how an investment can be considered successful if the value of the shares has become lower. As I understand it, there is no income, only losses.

Jim_Harman

An investment can have a positive total return if it makes distributions - dividends, interest, or capital gains for example - even if the share price goes down.

Say you start with 1 share at $100, it makes a $5 distribution, and ends the year at $97.50.

You are ahead by $2.50.

If the distribution is reinvested at $95, you will end up with 1.0526 shares which will make the ending value $102.63, which is also a gain.

Tom Young

"An investment can have a positive total return if it makes distributions - dividends, interest, or capital gains for example - even if the share price goes down."

Yes, of course it can, and your example proves that because the ending value is greater than the net basis of $95, and that's irrespective of when the $5 was distributed.  But with an ending value that's less than the net basis your chances of having a negative return for a period go up, depending on the ending value and the timing of the distribution and I can guess that's what the OP is experiencing here. 

q_lurker

@bellbill I'm going to suggest you check some of your data.  When I look at the price history for TRRBX, I don't see any price of 21.44.  I do see evidence of a 2.884/share total distribution on 12/21/21.  I see a price on that date of 21.93/share  I can see a couple of possible explanations.  

You are dealing with a retirement type account that offers a copy of TRRBX, but is not actually trading that fund.  Those situations trade in units rather than shares and have prices different than we see online when we look the retail traded TRRBX. 

Or, This retirement program offers a discount on reinvestments (and maybe other purchases).  That would be a good deal for you.  

Further as noted by others, you've not identified a time frame for your negative return.  Either computing through 12/21/21 and having an ending value using 21.93 or computing through 12/31/21 when the closing value was 22.21 should give you a more positive sense of your investment performance.