How do I handle this downloaded transaction?

Don Awalt

You may need your green eye shade on to help me with this one!

So here is the backdrop story...my mutual fund has created some new funds, identical in name and holdings to the fund they replace, but with some better/different cost structure for their fees. They are converting the old fund to the new fund. It has a separate account number, and has an "X Class" designation on the end of the name, but it is really the identical fund. They "move" all one's investments from the one fund to the other, albeit at a slightly different price reflecting a different cost structure I guess, and a slightly different number of shares (so the fund balance is the same). The way they do it, there is no tax transaction triggered - it is not really a sell/buy. My question is, I don't know how to process the transaction that came down (although it does not look like a transaction until accepted).

Here are the details of what I see:

I see the red flag on the fund, like transactions came down. But when I click on the account, I get a window up, which I partially show here - where Quicken asks me to confirm that this account info coming down is in fact one of the funds I already have. The top of it looks like this:



So when I click OK that it's replacing the correct fund, here is a hypothetical example of what happens to the account.....imagine before the download, "Fund WW" had 390.414 shares, at a closing price yesterday of $92.16, for a value of $35,980.55. After the investment is moved from Fund WW to "Fund WW X Class", it now has 394.610 shares at a price of $91.18, but with the identical fund/securities value - $35,980.55.

What Quicken does, is it adds a "buy" transaction. After accepting the transaction, the overall value of "Fund WW X Class is now the same, $35,980.55, but in fact looking at it, the securities value is reported as double - $71,961.10 (shares are approximately double too), and the funds cash balance is reported as negative, -$35,980.55, which equates to the correct overall fund value. This of course does not reflect what is truly in the account; shares should be 394.610, and price 91.18, and cash balance $0.

So how do I update this, not lose my transaction history, get the cash balance to $0, and have the securities value reflecting the new number of shares and price?

Thank you in advance for your help!

Tom Young

As to your "how do I use" it question, within the Account click on the Enter Transaction button, click the down arrowhead from the "Enter transaction" menu, select "Mutual Fund Conversion" and the following screen shows up:

For your example case you'd enter 1.010748 (394.610/390.414) in the "Shares of new" box.  (This screen isn't as clear as it should be since you'd probably be tempted to enter the 394.610 figure here.  But Quicken help states: "enter the number of new share class shares received for each original share class share.")

As to your "turn on/turn off" average cost question, if you're not relying at all on Quicken's accounting for basis I suppose it doesn't matter one way or the other as in either case you're not going to end up with a correct basis for the shares you own, in Quicken. 

One thing you might consider doing that would get you pretty much to the right place basis-wise would be to do your own Remove action for each fund, then do your 6 Add actions for each fund and use the average cost basis that the web site is using, or do your own calculation of average cost bases on what the web site is showing.  I'd probably use a "Date acquired" that would make all the holdings "long term", assuming that the bulk of the shares are long term.

Tom Young

The correct Quicken "action" to use here is the "Mutual Fund Conversion" action.  When you move, tax free, between different mutual fund classes or different mutual funds, (e.g., the mutual fund you own has been a dog and the fund managers want to quietly sweep this under the rug by closing that particular fund down in exchange for shares of a different fund), this is the Quicken action that accomplishes that.

A caveat: apparently if you've been using "average cost" for the "old" mutual fund the Mutual Fund Conversion action gives you erroneous results.  I don't know if this is still the case or not, but be sure to make a backup before using that action. 

An alternative action you can use is the "Corporate Acquisition (stock for stock)" action but this will affect the "old" fund in all your Quicken Accounts that also have the old fund as part of their portfolio.

Don Awalt

Thanks @Tom Young for your reply! How do I use the Mutual Fund Conversion - I am not sure of the steps I would use from the point this event/transaction has downloaded (but before I accept it)?

Jim_Harman

You should back up your data file just in case, then delete any downloaded transactions associated with this conversion.

Then click on Enter Transactions, pick Mutual Fund Conversion, and enter the requested info.

The Mutual Fund Conversion is designed for exactly this situation. It preserves the cost basis and holding period of the old fund in the new fund. It will create one Removed transaction for all the shares in the old fund and one Added transaction in the new fund for each tax lot that you held. This may take some time, so be patient!

Note that the Mutual Fund Conversion does not work correctly if you have selected the Use Average Cost option for the old fund. Please post back if this is the case.

Don Awalt

Thanks @Jim_Harman for your reply! Actually some of the funds are average cost (I have 6 funds to do!), some are not. That's probably because I don't really use cost for tax purposes from Quicken, because years ago I found it not correct so I go to the fund web site for that information if/when I need it. So should I proceed ahead? Second question, is it ok if I turn off average cost on every fund that has it first (or should I go the other way and turn it on on everything first), for uniformity since I don't really use it at this time? It would be nice to "clean it up" if possible...

Tom Young

As to your "how do I use" it question, within the Account click on the Enter Transaction button, click the down arrowhead from the "Enter transaction" menu, select "Mutual Fund Conversion" and the following screen shows up:

For your example case you'd enter 1.010748 (394.610/390.414) in the "Shares of new" box.  (This screen isn't as clear as it should be since you'd probably be tempted to enter the 394.610 figure here.  But Quicken help states: "enter the number of new share class shares received for each original share class share.")

As to your "turn on/turn off" average cost question, if you're not relying at all on Quicken's accounting for basis I suppose it doesn't matter one way or the other as in either case you're not going to end up with a correct basis for the shares you own, in Quicken. 

One thing you might consider doing that would get you pretty much to the right place basis-wise would be to do your own Remove action for each fund, then do your 6 Add actions for each fund and use the average cost basis that the web site is using, or do your own calculation of average cost bases on what the web site is showing.  I'd probably use a "Date acquired" that would make all the holdings "long term", assuming that the bulk of the shares are long term.

Jim_Harman

If you leave the Use Average Cost option enabled and you have multiple tax lots, the Mutual Fund Conversion will produce a wildly incorrect value for the cost basis of the new security. If you have 8 tax lots for example, the new cost basis will be 8 times what it should be.

If you have not made any sales in this security or you have made sales but you don't care about getting the cost basis exactly right, you can un-check the Use average cost option before doing the Mutual Fund Conversion.

Maybe someday Quicken will fix this!

Don Awalt

Thanks @Jim_Harman for the updates....I just finished my first fund. I'll document it here in case anyone else comes across this, it worked well with a couple of small changes. I found one of the 6 mutual funds to try, that I have only had 3 years, and it only had 3 purchases and no sales - so an easy one. I copied all the relevant info on the fund balances, costs, income, etc. prior to starting this, by looking at one of the investment reports. This was an account that did NOT have Average Cost checked, if that matters.

I accepted the downloaded transaction after I directed Quicken to the proper mutual fund per the dialog I posted in the OP. As you said, I deleted it, went to Enter transactions, and started a Mutual Fund conversion. The two things I discovered that made it work (I did it a couple of times, it wasn't right, so I just deleted the removed transaction and the three Added transactions to the new funds and tried again.

First, when you add old and new fund name, I didn't realize at first I had to, for the new fund, "Add" the new fund via it's ticker symbol - which you can do right from the "new fund" drop down in the Mutual Fund conversion dialog box. The old and new fund have different ticker symbols.

Second, it looks like they fixed the one thing you mentioned. I added New shares as a ratio, and it ended up making the total fund balance of the new fund post-conversion just the amount of the closing price per share! Oops. So I did it again, and this time added the true number of new shares, then the new price per share, and everything worked perfectly.

I used an investment report to compare, and price per share, total shares, value, cost in dollars, avg cost per share, gain/loss, and income are correct! In fact, I could take the old average cost per share, multiply it by the ratio you mentioned (new price/share divided by old price/share), and I get the new average cost per share reported by Quicken, so it looks right to me!

Thanks so much for your help - I think I am in good shape now unless you see something else I missed/messed up!

Don Awalt

A couple of comments on the second fund - this was not that much more complicated, only 4 buys I think - but after it finished correctly, on the investment report it shows average cost at $91.75, from the web site it is $22.85 yikes! So it now shows a big loss on that report as well. It's a shame they can't fix that. I even turned on average cost for that fund, and it said it was recalculating average cost, but it came up with the same number. Is there any way I can brute force it to the correct number?

One other thing - this process wipes out "ROI % (YTD)" on my report, just like if you add a new fund in the middle of the year, Quicken doesn't know how to calculate ROI for a partial year - which is funny since Excel can lol. I wish they would fix that too!

Jim_Harman

So just to clarify, the correct number to enter in the "Shares of new" box is the total number of new shares you received, and not the ratio of new to old. Looking back in previous discussions about this confirms this, and that the in-product Help is incorrect.

Don Awalt

Correct - enter into "Shares of new" box the total number of new shares received.

Don Awalt

Don Awalt said:

A couple of comments on the second fund - this was not that much more complicated, only 4 buys I think - but after it finished correctly, on the investment report it shows average cost at $91.75, from the web site it is $22.85 yikes! So it now shows a big loss on that report as well. It's a shame they can't fix that. I even turned on average cost for that fund, and it said it was recalculating average cost, but it came up with the same number. Is there any way I can brute force it to the correct number?

One other thing - this process wipes out "ROI % (YTD)" on my report, just like if you add a new fund in the middle of the year, Quicken doesn't know how to calculate ROI for a partial year - which is funny since Excel can lol. I wish they would fix that too!

@J@Jim_Harman did you see this post? Also, on the first one, if I turn OFF the "Use average cost" under edit security, then do the conversion, the average cost etc. is much closer to correct in the reports - this same example that the web site shows as $22.85, it now shows as $23.04.

Jim_Harman

On the $91.75 average cost, that would be consistent with the problem that occurs when you have "Use average cost" selected for the old security (about 4 x $22.85).

I think if you delete the transactions for this conversion and un-check "Use average cost" for the old security then repeat the conversion, you will get correct results.

If you set up a portfolio view with just the old and new securities selected then look at the account level ROI (%) YTD, are the results more reasonable?

Jim_Harman

Don Awalt said:

Don Awalt said:

A couple of comments on the second fund - this was not that much more complicated, only 4 buys I think - but after it finished correctly, on the investment report it shows average cost at $91.75, from the web site it is $22.85 yikes! So it now shows a big loss on that report as well. It's a shame they can't fix that. I even turned on average cost for that fund, and it said it was recalculating average cost, but it came up with the same number. Is there any way I can brute force it to the correct number?

One other thing - this process wipes out "ROI % (YTD)" on my report, just like if you add a new fund in the middle of the year, Quicken doesn't know how to calculate ROI for a partial year - which is funny since Excel can lol. I wish they would fix that too!

@J@Jim_Harman did you see this post? Also, on the first one, if I turn OFF the "Use average cost" under edit security, then do the conversion, the average cost etc. is much closer to correct in the reports - this same example that the web site shows as $22.85, it now shows as $23.04.

Our posts crossed. Good to hear the average cost is more reasonable. I think if you go to the Holdings view and click on the plus sign next to the new security and note down the cost basis for each lot then set the As of date to before the conversion and look at the lots for the old security, you will see that the cost bases are the same.

Don Awalt

@Jim_Harman yep that's what I did, turned off "Use average cost" and the numbers are very close! As for the second, I created a new report as you said, and ROI is still "NA".

Don Awalt

Posts crossed again - I may not have done the correct report. Where is the Holdings View, I don't see that?

Jim_Harman

Go to the account and click on Holdings. It is like the Portfolio views but not customizable and just for the one account.

Don Awalt

Got it thanks!

Jim_Harman

For a further discussion of the Use average cost issue and an opportunity to vote for improvements in this area, please see this Idea post
https://community.quicken.com/discussion/7861196/fix-mutual-fund-conversion-so-cost-basis-is-correct-if-holding-is-set-to-use-average-cost