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Re-Invested dividends--Income/Expense by Category Reports

Gary R

Quicken downloads re-invested dividends showing the dollar amount and the shares received. The dollar amount of the dividend is classified under DivIncome when you view your Income/Expense report by category.
I track all my income and expenses(expenditures)
When you re-invest the dividend in additional shares, you are in affect making an expenditure. However, there is no way to show this expenditure in the Income/Expense report. (Spending Report)
Any suggestions how to record this transaction in order to show the income from the dividend and then the expenditure for the purchase of the shares.

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Comments

Jim_Harman

I disagree that buying shares, either by reinvesting dividends or by an explicit purchase, is an expenditure. When you buy shares, you are shifting money from your cash pocket to your securities pocket. By your reasoning, you would also show the proceeds from shares sold as income.

Gary R

Morning Jim
I use my income/expense by category report to see if my expenditures (expenses) exceed my income for the year. Let's say I don't re-invest my dividend income. The dividend income will be shown in the Income top line under DivIncome category.
Now, if I choose to re-invest the dollar amount it seems like an expenditure to me since I am taking the dividend income and spending it on additional shares.
Let me give a simple example:
Social security for year------$24,000
Dividend Income 10,000
Total Income 34,000

Expenses(No re-investment) 30,000
Excess 4,000

However--If I choose to re-invest the $10,000 dividend, then my expenditures would be $40,000 and a $6000 excess of expenditures over the income.

Jim_Harman

Because there is no special Category assigned to dividend reinvestments or purchases and sales of securities, I don't know of any way to filter them for reporting purposes.

Your approach to "income" and "expenses" seems odd to me.

If you receive a cash dividend and choose to invest it in the same security in a separate transaction, you have done the same thing as a Reinvest. Would you consider that purchase or any other security purchases as expenses?

If you sell a security, you have more cash in your investing account. Do you consider that as income?

If rather than paying a dividend, a company keeps the money and its share price increases, do you consider that to be income?

My approach to tracking "income" and "expenses" is to exclude investing accounts from spending reports and pay all my expenses from Banking accounts. I transfer money from investing to banking accounts each month to cover the expenses. On the Advanced tab of Spending reports, I have Transfers set to Exclude Internal. With this approach, transfers from the investing accounts show as "income" and transfers to them show as "expenses".

If you are paying expenses directly from your investing accounts, you might want to try (after making a backup) setting the "Show cash in a checking account" option for the investing accounts and excluding the investing accounts from your spending reports. If your FI automatically sweeps cash to a money market fund, you will want to delete or not accept those transactions so that the cash remains in the linked checking account.

With that setup, reinvested dividends remain in the investing account and do not contribute to "income" or "expenses" but dividends received in cash show as a transfer from the investing account and thus as "income".

Gary R

My reply is NO to your first three questions. I don't consider investment related sales or purchases as income or expense.
I think I found a solution. I set up a report for just dividends re-invested in the Reports center.
I'm just going to treat that amount as "additional expenditures" when I view my Income/Expense category reports.
All of my accounts are listed under Investment accounts and include all brokerage and Banks.

Bob_L

I agree completely with @Jim_Harman: you are confusing expenditures with transfers. When you make an expenditure the money is gone i.e. your net worth decreases by that amount. On the other hand, if you invest 10K in a security, your net worth does not change.

Gary R

Bob--I'm not confusing expenditures with transfers
Maybe it would just make more sense to eliminate the category "Div Income" from the income/expense category report and call it a day.
(I do have dividends that are not re-invested and go into the cash money market account to pay bills.)

Jim_Harman

So it sounds like for reporting purposes you would like to treat cash dividends as "spending money" but not dividends that are reinvested. Normally all dividends have the Category _DivInc.

One way you could handle this would be to use the Miscellaneous entry when recording cash dividends, using a Category of Dividend Income, and let the reinvested dividends keep the default _DivInc.

Then you could include Dividend Income in your reports and exclude _DivInc, and I think you will see what you are looking for.

Tom Young

@Gary R

It appears to me that you do know the difference between income and expenses vs. transfers into and out of Accounts or between cash and securities. What you're really looking to achieve here is a "cash flow" report where the distinction between Category vs. Transfer just doesn't matter. It's "cash in" or "cash out" that you want to track, over all your Accounts.

The problem is that there's just no easy way to pluck the purchase leg of a reinvested dividend or a security Buy (another "cash use") out of an Investment Account and pipe it over to a Spending or Banking report. To do that successfully would require that an "Actions" tab be added to those reports' customization screens, the same tab you see in an Investments Transaction report.

Gary R

"So it sounds like for reporting purposes you would like to treat cash dividends as "spending money" but not dividends that are reinvested. Normally all dividends have the Category _DivInc."
You got it!!!!!! Your solution is brilliant and spot on!!!!!!!! I'm going to spend the afternoon setting up a new category under misc. (Dividend Income).
FYY--Interest income downloaded from my banks and brokerage is reported as interest income.
That interest is available for spending.
Dividend income not re-invested should be treated the same way---I'm spending it.
Jim--I have one last question-------Why are you not consulting for Quicken at a fee? YOu probably know more than 90% of the support team there.

Chris_QPW

Sorry, But I'm not following the thought process of the SuperUsers in this thread:

Jim_Harman said:

If you sell a security, you have more cash in your investing account. Do you consider that as income?

I certainly do, and so does the IRS.
And the same goes for dividends whether you reinvest them or not.

The only reason it wouldn't be income is if the transaction was if it was in a tax exempt/deferred account/security (by the IRS, but one could argue that it is still income to the you).

So I don't really see this discussion to be about income or transfers or such.

It is the desire to record something in a given cash flow report.
And that is quite different than "income".

Income is defined as: "money received, especially on a regular basis, for work or through investments"

But a lot of people think it means "the money I need to cover my expenses" or something like that.
If all I had some cash under my mattress, I would have zero income, but I would still have "cashflow" and I might be concerned about how much money I have to take out of my mattress to meet my expenses might be considered by some people "income".

q_lurker

Gary R said:

... Interest income downloaded from my banks and brokerage is reported as interest income.
That interest is available for spending.
Dividend income not re-invested should be treated the same way---I'm spending it.
...

Historically through today, there is a difference with regard to Quicken.

Banking accounts from day one needed a category for interest received. Thus, an "Interest" income category was included by default, but was also changeable. In various files, I currently have "Interest" with subcategories, "Interest Inc", and none. Some (many) users have only that need and that sufficed.

As Quicken developed or added investment capabilities, they chose an as Action based model for those accounts. In their adopted structure, they needed defined unchangeable categories, so they created the hidden categories including _DivInc, and _IntInc and their tax-free counterparts. Those 'hidden' categories by design cannot be renamed by the user.

That is where the difference exists. In the world which Quicken is modelling, dividends are only received through investment accounts. Interest can be received through both investment accounts and banking accounts (and asset accounts, user as lender). Since dividends cannot be received in a banking account, there is no need for a (user changeable) "Dividend Inc" category. There is also nothing preventing the user (you) from creating that extra category and using it in a manner suiting particular needs.

Dividend income not re-invested should be treated the same way. "Could be" maybe, but that is certainly not a "should be" for most users. I would have a problem with regular dividends and reinvested dividends falling into different reporting sets. Indeed, I have one file where I choose to report bank interest using the _IntInc category just to keep reporting consistency with the more dominant investing account interest received. There I consider the "Interest Inc" category extraneous. But I am not going to say Quicken "should' eliminate it.

Perhaps if they were starting from scratch today, they would choose some other structure better suiting both of our needs and desires, but they had to make choices decades ago that we today still need to live with. It's not fair to fault them for those choices.

q_lurker

Chris_QPW said:

Sorry, But I'm not following the thought process of the SuperUsers in this thread:

Jim_Harman said:

If you sell a security, you have more cash in your investing account. Do you consider that as income?

I certainly do, and so does the IRS. ...

More accurately, the IRS considers only part of that cash-from-sale as income.

I think the point @Jim_Harman and others are trying to make is that if all the money used to buy the shares (the re-investment) is seen as an expense, is all the money recouped from the sale of those same shares seen as income. And is that purchase of shares by reinvestment different than outright purchase of shares with cash from other sources. What would be the justification for different treatment?

But as @Chris_QPW goes on, this discussion is really cash-flow rather than income/expense. A Banking / Cash Flow report with investing accounts excluded and internal transfers excluded would likely suffice for most users. But even that can depend on how the spending from the investment accounts are managed.

Jim_Harman

@Gary R If you are going to use a separate Category for dividends received in cash, be sure to assign it the "Schedule B:Dividend income" tax line item so that Quicken's tax reporting will be correct.

Gary R

Thanks Jim---Definitely will do that---I just read a couple other comments just posted but just confused me and I like your way of handling my issue. I think you get it and understand what I was trying to accomplish.

Jim_Harman

@Gary R I understand what you are trying to do but for the record and as I tried to explain above, I do not agree with that approach. I have found that it is often better to make the effort to understand how Quicken is structured and "go with the flow" rather than try to force a different model on it.

Gary R

Jim--I can view my income/expense category report and see exactly if my expenses exceed my income. Interest income from my brokerage is income and recorded in my money market accounts. Interest income from banks are shown as Interest income also. Dividends received and not re-invested are shown as Dividend income and shown in the income line on the report. These are all income that are in my money market accounts available for expenses. However, Re-invested dividend income is not available for spending since it is going to buy more shares.
You gave me a solution and I liked it. I think I have another way to handle this and it will accomplish the same thing. When Quicken downloads re-invested dividends, it shows the dollar amount and shares .
I can simply delete the dollar amount and just show the shares. Most of my accounts are tax deferred and not really concerned with the cost basis that Quicken shows. Do you see any problems with my thought process here? I would just delete the $95.72 to show zero.

Image: https://us.v-cdn.net/6031128/uploads/editor/vu/n59h9ejyxwcb.png

Jim_Harman

That would be telling Quicken that you received a dividend of zero and it bought 1.319 shares. I suppose that would make your report show what you want, but it will throw off Quicken's performance tracking. In a taxable account, it will also throw off dividend and cost basis reporting.

It's certainly not what I would do, but it is up to you.

If the accounts with reinvested dividends are tax deferred and you are not spending directly from them, why not just exclude those accounts from your report? In taxable accounts where you are doing any trading, it is often a good idea not to reinvest any dividends, to avoid wash sale issues. Those two changes would also make the report show what you want I think, without having to do any funny business with recording the dividends.

Gary R

Jim---I'm not sure if it will have any affect on performance tracking. I tried a small sample of several stocks and performance was the same with dividend changed to zero. I agree it will throw off cost basis in a taxable account

Jim_Harman

I guess it will not affect the Avg Annual Return (%) numbers or the IPR but in the past you have made a big deal of other performance measures. As I said, it's not what I would do.

Gary R

You're right--I did have issues with the % performance measures but decided they were of no use to me. Vanguard does not give YTD % returns, but will give % returns for one year thru inception
Fidelity performance tabs show YTD % returns, 1,3,5,10, thru inception
Appreciate your time and replies

q_lurker

Jim_Harman said:

I guess it will not affect the Avg Annual Return (%) numbers or the IPR but in the past you have made a big deal of other performance measures. As I said, it's not what I would do.

It certainly will affect Avg Annual Return % values, although the small magnitude of most reinvestment transactions my hide the effect. That approach is saying that lot was bought for $0 and immediately took on a very positive value. $0 in the investment column of the Investment Performance report and a positive increase to the ending market value. Over time, that error will only grow. A terrible plan, IMO, and I'll just leave it at that.

Jim_Harman

@q_lurker actually I think @Gary R's approach, while not a good idea, will not affect the Avg Annual Return (%) numbers for the special case of reinvested dividends.

The reason for this is that the Investment and the Return for the ReinvDiv are on the same day, so they cancel each other out. It does not matter that they are both zero. They are not included in the detail in the Investing Performance report and do not affect its calculations.

[edit - additional info] A same-day reinvestment is just as if the value of the holding jumped up by the amount of the dividend on the reinvestment date. For better or worse, the IRR calculation ignores volatility and just considers the amounts and dates of net cash flows. The ending value of the shares purchased by the dividend is included in the ending market value.

As an example, I have an account that holds a security that reinvests its dividends every quarter. The only details that show for the account are the starting and ending balance and a deposit I made in January.

q_lurker

Jim_Harman said:

@q_lurker actually I think @Gary R's approach, while not a good idea, will not affect the Avg Annual Return (%) numbers for the special case of reinvested dividends.
...

Upon further review, I concede that issue for the reasons Jim described above.

Still a terrible plan. Quicken works best when it accurately models and follows real-world activity. When users cobble together alternate models, it seems unintended consequences are all too frequent.

Gary R

Let me thank both of you for your comments and time. Maybe I should try and explain what I am trying to accomplish. My income/expense category report is accurate to the dollar. All income from social security, pensions, interest and dividends, and consulting fees are included in Income.
Every payment that is entered in my portfolio register is assigned an expense category. Therefore, I know each day the bottom line. I purchased a car this year so my expenses exceed my income by $40,000.
I wanted to be able to compute my year to date % loss but unfortunately Quicken cannot do this for me. I had numerous buys and sells this year.
I'm no math genius but I took my 1/1/2022 opening portfolio balance and subtracted the ending balance Let's say the portfolio shows a decrease of $150,000. I then subtract $40,000 (excess expenses) and end balance is a loss of $110,000. $110,000/opening balance===% Return(loss) year to date

I wasn't sure how to account for Re-invested dividends and that is what prompted by original question. The dividends that are included in income above are NOT re-invested. They are deposited in my money market accounts.

My portfolio register shows Return Year to date. The amount does not agree with my Return Year to date computed with my example above. It's $11,000 off. I have been spinning my wheels trying to figure why they don't agree, but just gave up.

Jim_Harman

Is the $11,000 difference the amount of dividends that were reinvested? That would be my guess.

In the example above you don't talk about return YTD, you talk about % loss. One is a dollar amount and the other is a percentage. Which do you want?

Since you have an unusual definition of "income", I doubt your calculation of "return" will match Quicken's.

Also note that Quicken's definition of Return may not match yours, because it depends on Amount Invested, which does not decrease when securities are sold. Also see this discussion, which I have sent you at least twice before, for more information.
https://community.quicken.com/discussion/7864889/account-level-amount-invested-and-roi-are-calculated-incorrectly-when-a-security-is-sold/p1

If your question is "How have my investments performed YTD, given that I have made deposits and withdrawals along the way, bought and sold securities that have gone up and down, moved securities between accounts, and received dividends, some in cash and some reinvested?" I will repeat this recommendation one last time:

Set up an Investment Performance Report that includes all your accounts and categories. Set the date range to Yearly and Current year (not YTD). If you have entered your transactions correctly and have no Placeholders or other anomalies, you will see a percentage return that assumes your security prices will remain constant for the rest of the year. If you set the date range to YTD, you will see a percentage return that assumes the YTD performance of your securities will continue at the same rate for the rest of the year.

q_lurker

Let me take this a line at a time with my explanation, interpretation, or observation.

My income/expense category report is accurate to the dollar.

All your transactions are properly recorded as you see them with no truly uncategorized transactions. The report follows from the data. Presumably this report is including ALL accounts including retirement accounts and other asset and liability accounts. I will occasionally use that comprehensive report as a part of checking change in new worth for the year. What that report usually omits is the change in market value (the change in unrealized gains/losses) of the securities owned.

All income from social security, pensions, interest and dividends, and consulting fees are included in Income. Every payment that is entered in my portfolio register is assigned an expense category. Therefore, I know each day the bottom line.

I expect the income would be including all reinvested dividends in addition to paid-in-cash dividends and realized capital gains from security sales. But what is "the bottom line"? Yes there is a net of Income less expenses and positive there is good, but depending on how your accounts are setup and your report is customized, you can get a wide variety of 'correct' bottom line numbers.

I purchased a car this year so my expenses exceed my income by $40,000.

I purchased a car this year also and there can be a variety of approaches to that transaction. I my case I choose to have a Car asset account. The purchase was thus a transfer of money first from an investment account to my checking account, then from the checking account to the Car asset account.

One form of the I/E report omits that altogether (transfers excluded). It is value just moving from one pocket to another to another.

Another form of the report (Transfers Included) shows the $45K transfer from Investment to checking as income, an expense transfer of $45K to the Car asset, then another $4K back as income from the Car asset account (essentially a rebate, but not exactly).

I believe both forms of the report are fully accurate, even thought their bottom lines differ. Because the car is an asset, my expenses (the purchase) are not a factor in comparison to my income. That is my choice on how I handle such assets. But I would argue whatever account-level approach is taken, there is reporting flexibility. That may come down to simply remembering a special $40K expense.

I wanted to be able to compute my year to date % loss but unfortunately Quicken cannot do this for me. I had numerous buys and sells this year.

See Jim's response. Use the Investment Performance Report.

I'm no math genius but I took my 1/1/2022 opening portfolio balance and subtracted the ending balance Let's say the portfolio shows a decrease of $150,000. I then subtract $40,000 (excess expenses) and end balance is a loss of $110,000. $110,000/opening balance===% Return(loss) year to date

First, I am not fully clear on your account setup, the extent to which you use a cash management account for everyday expenses. FWIW, I don't. I irregularly transfer fund from select investment accounts as needed to cover upcoming expenses. Thus my regular expenses are out of accounts totally separate from my investments. YMMV.

Further, it is not a matter of just your excess expenses ($40K). What else did you take out of that portfolio? If your dividends received (in cash) go yo a different account (not included in that portfolio picture) and pay utilities, groceries, clothing, those too count as returns for the performance calculation. Or independent of the dividend consideration, if you pay for those everyday expenses from 'cash' that is part of that portfolio picture, they count in the performance calculation.

Sort of final comment -- I've been critical of your plan to alter the recording of real world transactions to fit your reporting desires. To try to clarify that objection better, the transaction is what the transaction is. I don't think that should be altered to fit the picture you are trying to see. IMO, it is far better to adjust the picture - the report - that it is to alter the actual data. Consistent with that adjustment is to understand the picture the report is showing you. Specifically, just because something is in the Income block may not make it the income you are used to seeing or thinking about. Likewise expenses. But the real world data is what it is.

Hope this helps.

Gary R

q-lurker---A lot to reply too:
All my accounts are included--However, under category--type---Capital gains, realized gains, unrealized gains are excluded.
Re-invested dividends are included in the income line
The car purchase was recorded as an expense, paid from one of my bank accounts.
Jim's suggestion for YTD % via the performance report is not accurate. It's just too far off from my brokerage YTD % numbers after further analysis.
All of my accounts are under "Investing". No retirement accounts. I pay all my expenses from the various bank accounts and each payment is properly categorized . I also have a credit card with Fidelity, pay that monthly, and the expense is recorded in the report.
Jim said the difference of $11,000 may be the dividend-reinvestment. I wish it was--but the dividend-reinvestment was only $2500.

Gary R

"Set up an Investment Performance Report that includes all your accounts and categories. Set the date range to Yearly and Current year (not YTD). If you have entered your transactions correctly and have no Placeholders or other anomalies, you will see a percentage return that assumes your security prices will remain constant for the rest of the year."
Well--I did this and this report makes NO sense----completely nonsense!!!!!! I wish I had that kind of money to begin with and 39% loss--WTF?????

Image: https://us.v-cdn.net/6031128/uploads/editor/f3/g98dgukvqmos.png

Gary R

Jim--Set date range to YTD----This makes absolutely no sense and numbers are useless.
My YTD % loss should be somewhere between the Dow and S&P 500 losses. 55% Quicken---WTF?????

Capture.PNG

Jim_Harman

@Gary R
You are missing my point about the difference between setting the Investment Performance Report (IPR) date range to the whole year vs YTD. The IPR presents an annualized Average annual return, which is the result of an Internal Rate of Return (IRR) calculation. Today we are about 70% of the way through the year and the S&P 500 is down about 17% YTD.

If you have an account that holds an S&P 500 index fund with no trading and set the date range to YTD, the IPR will annualize that rate to about -24%. It assumes the S&P will continue its trend for the rest of the year. Is that a good assumption? I don't know.

If you set the date range to Annual and Current year, which is what I recommended, the IRR calculation assumes there will be no further gains or losses for the year and it will show a rate of about -17%. I don't know if that is a good assumption either, but it matches what is commonly reported as YTD returns.

[edited for clarity] As to your personal numbers, don't be thrown off by the totals at the bottom of the Investments and Returns columns. You have done a lot of trading and moving of securities between accounts this year and that activity is included in the Investments and Returns columns. The totals are not meant to indicate that you ever had that much money.

Also I see a lot of BoughtX and SoldX transactions. That implies that there are cash accounts that are not included in the analysis. Do you have the Show cash in a checking account option set for some of your accounts? It appears that with that option set, the IPR does not include the money in the cash account in its calculations. For other cash accounts, you can set the Account Intent to Investing but that just puts blank lines in the IPR, a bug I think.

Unfortunately the report is sorted by Account then Date and there is no way to change that. That makes it hard to see transactions that move money or shares between accounts. I think it would be more readable if it were sorted by date.

The numbers may make more sense to you if you if you change the Subtotal by: setting to Account. If you do that, you will want to exclude accounts that have had zero balances for the whole year, so you only see active accounts.