Investment Performance Reporting
I believe something has gone wrong with the report. It seems to now NOT include buys & sells within the specified time period, instead including only CASH type transactions, ROC, etc. This definitely yields an incorrect result. HELP!!!
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The IRR calculation is entirely a "cash flow" report. It looks at cash into an Account and cash out of an Account, as well as beginning and ending balances of the Account.
IF you have cash sitting in an Investment Account and use that cash to buy a stock, THEN that transaction will not be picked up in the IRR report because cash didn't cross the boundary between the Account and the rest of the world. Likewise a sell of a security, with the cash remaining in the Account, won't show up for the same reason.
Is this what you're seeing>
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Adding to Tom’s comment, if you subtotal the report “by Security” you will see those buys and sells (and dividends) and the individual average annual return for each security.
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Not exactly - though I see where I'm confused with respect to BUYs and SELLs. I'm used to running this report based on individual stocks, and thinking this through see why details such as dividends, buys and sells with respect to that given stock have to be isolated from the "total" cash of the portfolio to determine the performance of a particular stock (or group of stocks), and that when looking at the entire portfolio, ARR can be calculated based on beginning balance and ending balance (adding any external deposits to the beginning balance, and adding any withdrawals to the ending balance) resulting in the following formula:
ARR (Annualized Rate of Return) = (((Ending Balance + Withdrawals) - (Beginning Balance + Deposits))/(Beginning Balance + Deposits))^365.25/(number of days between beginning date and ending date).
This is a "smoothed" figure in that it yields an ARR as if all external deposits were made at the beginning date, and all withdrawals were made on the ending date. Not sure (too lazy to look) to see if IRR takes the timing of deposits and withdrawals into effect.
At any rate, the problem is bigger than this. When I run performance for the entire portfolio, I'm also getting "Shares Added" and "ROC" transactions included. What's odd to me is that the report is using the closing price (as opposed to the Total Cost) entered in the transaction) for the stock, and the "market value" (as opposed to the Amount) for the ROC transaction. For a stand alone ROC transaction (cash paid to shareholder with a corresponding reduction in cost basis), the cash is already represented in the ending balance (wouldn't this result in double counting). With respect to Add Shares/ROC pairs resulting from a corporate spin-off, the two transactions are normally the same amount (and thereby offset each other). But because Quicken is using the closing price on date of the Add Shares transaction, and the optional market value (as opposed to the amount) on the ROC transaction, they don't necessarily offset. To see a reason for using the optional field, see the following discussion
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Hey q_lurker - glad you weighed in. Tried sending you a message directly to see if I could get you to do so (not sure if the way I tried would actually work). See my last comment. I've adopted your method (faithfully, I hope) of handling corporate spin-offs (no MiscX transaction). I'll have to test using the Quicken default method to see how the performance reports comes out, but my initial guess is that it's going to be wrong as well and that using your method is not the root cause of the issue. BTW - in revisiting this again (in conjunction with the MDU/KNF spinoff dtd 05/31/23), I'm not really sure what's going on with the ROC transaction. When not specifying a Transfer Account, the cash balance in transaction account is increased (makes sense, as that's where the returned capital should go). But when explicitly specifying the Transfer Account as the transaction account (i.e. transfer to itself), balance is NOT increased. That's what I want, as I use an Add Shares transaction (as opposed to a BUY which would utilize cash from the account) to record the spinoff shares, allocate cost basis, and set purchase date). Guess I'm answering my own question, a transfer - RtnCapX - would reduce the cash balance in the source account and increase it in the target account for a net 0, but not perfectly obvious (at least to me).
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Quicken's Avg. Annual Return uses an IRR calculation, which does take into account the timing of money added or removed from the portfolio.
In my experience, its results are identical to Excel's XIRR function, given the same cash flows and dates. See this discussion for more details.
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Not sure (too lazy to look) to see if IRR takes the timing of deposits and withdrawals into effect.
Yes, timing is a factor in the program’s calculation.
I am currently trying to clarify in my own mind the interaction of MiscInc and MiscExp transactions with the IPR average annual return calculation. The -X variations on those and the RtrnCap are another avenue to be reviewing.
The use of closing values for Add/Remove shares was adopted a few (2-3) years ago in a moving away from using cost basis values. That does lead to requiring a tweak on the related RtrnCap transaction for spin-offs. I am reluctant to push too hard for something better due to the risk of it becoming worse.
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This is probably NOT the place to interject this, and pretty sure I had a discussion in the distant past on this topic, but it sure would be nice for Quicken to add the ability to do what I call (there's probably a technical name, but I don't know it) simple return over a period of time, which is simply ([Ending Balance] - [Beginning Balance])/[Beginning Balance]. I find myself constantly needing this to compare with performance results published for various portfolios I track. If I remember correctly, someone indicated to me that to use Quicken to yield the same result I'm after, just set the time period for 1 year. For example, if I want to get the simple return for the 07/2023, just set the Quicken Performance Report to a date range of 07/01/23 - 07/01/2024. Theoretically, that works, except (a) it's not exactly the same, since Quicken uses IRR which takes into account timing of returns (though it's normally pretty close when dealing with a span of 1 month) and (b) If there are already transactions in the register subsequent to 07/31/2023, it's going to pick them up and yield an incorrect result. Sure would be handy, at least from my perspective, to include this "simple return" in the performance report (either as an option, or along with the annualized return). Any one else wishing this calculation was included?
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[deleted]
Quicken user since version 2 for DOS, now using QWin Premier (US) on Win10 Pro.
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I think ROI (%) with the starting and "As of" dates set to your desired dates is what you are looking for, but that depends on how you would handle departs, withdrawals, etc.
You could also use the Investment and Returns numbers from the Investment Performance Report.
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@Cyclist I don't have a specific problem with how you described the Avg Annual Return calculation above (June 26), but a more elaborate rigorous mathematical formula per Quicken is here
The real formula is not your "smoothed" version with assumptions about timing of additions and withdrawals.
… it sure would be nice for Quicken to add the ability to do what I call … simple return over a period of time, which is simply ([Ending Balance] - [Beginning Balance])/[Beginning Balance].
The ROI % figure is somewhat in line with your request. But take note of the comments about ROI, Return, and Amount Invested in that same link I provided. Timing is also critical and pretty inflexible. The As of ending date is clear, but the starting date is only defined through the date specified at Options / Portfolio Preferences / Show return calculations from.
If I remember correctly, someone indicated to me that to use Quicken to yield the same result I'm after, just set the time period for 1 year. For example, if I want to get the simple return for the 07/2023, just set the Quicken Performance Report to a date range of 07/01/23 - 07/01/2024.
That suggestion applies only to the Average Annual Return calculation primarily when trying to see a return for a shorter period of time (YTD for example) not annualized. You might be able to use that trick to see a July 2023 'simple' return, but not for April 2023, because the May-June-July transactions would be included. That trick would also fail of you have entered expected dividends or other transactions in advance.
As to your other June 26 comment, I do think you are understanding correctly and have answered your own question.
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