Finding performance when reinvesting

HowardSpindel

I have been reinvesting dividends for many years. Naturally, those reinvestments get added into my cost basis. This obscures my real performance.

I would like to see a report that shows how well I've done based on my original investment only. That would be total gain = (market value - cost basis) - reinvestments. Furthermore, I'd like to see a percentage gain from my original investment. I think that would be percentage gain = market value / (cost basis - reinvestments), but I am not sure.

Does Quicken provide these numbers in reports? What does Quicken call them?

Jim_Harman

Reinvesting dividends and other distributions is equivalent to receiving the distribution in cash and using it to buy more shares on the same day. The distribution and the purchase cancel each other out and at the end of the period you have more shares than you started with and thus a higher ending balance.

For a security with a fixed share price like a money market fund, the cost basis increases along with the market value and there is no capital gain when you sell it, but there is certainly a positive return.

The Quicken measure that captures this is the Average Annual Return, as shown in the Investment Performance Report and the Avg. Annual Return (%) columns in the Investing > Portfolio views and each account's Holdings view. The calculation behind the scenes is the Internal Rate of Return (IRR) and it matches Excel's XIRR function. It also takes into account the amount and timing of any additional purchases or sales during the period. It assumes daily compounding.

The calculation is annualized, so for multiple years it computes the average percentage gain per year. For periods of less than one year like YTD, it assumes the performance will continue at the same rate for a full year, which may or may not be a good assumption.

If this is not what you want, you might consider ROI (%) in the Investing > Portfolio views. This is not annualized. so it is a straight percentage gain or loss. Some investing transactions may give unexpected results.