Performance - Redux -- Growth of $10K chart

q_lurker

In a recent discussion, @Gary R was dismayed and flummoxed at Quicken's presentation of the Dow Jones 30 Industrial performance in the Growth of $10,000 chart. I have followed up with some further research that may be of interest to some (but apparently not Gary).

The issue appeared to be that Quicken's "Dow Jones Industrial" Market Index is exactly as published every day throughout the year and does not include dividends paid by those securities. This is true not only for the Dow but also for the S&P 500, Nasdaq, and Russell 2000 indices that Quicken also readily offers for comparison. For most users, a comparison of their investment performance, which likely includes dividends whether paid in cash or reinvested), against market indices that do not consider dividends is certainly not a wholly valid comparison.

What I did:

1. I dug deeper into Quicken's available security indices. It has previously been identified that there is a S&P 500 Total Return index (INDEX:SPXT) that is the base S&P 500 with dividends included. Turns out there are also available indices for the others.
   1. Dow Jones Industrial Net Total Return — INDEX:DJINR
   2. NASDAQ Composite Total Return — INDEX:XCMP
   3. Russell 2000 Total Return — INDEX:RUTTR
2. I also found outside of Quicken YCharts.com presenting the "Total Return" data for the Dow Industrials.
3. As Gary was basing his frustration on the returns presented by DividendChannel.com for the ETF DIA, I added that security to a test file along with all the dividends for that 2-year period that Gary was interested in (2022-2023). In one account, dividends were paid in cash. In a second account, dividends were reinvested.

What I found is presented below for that full two year period:

• Using the beginning and ending published values for the Dow — 3.72% 'return'
  • 37689.54 / 36338.30 - 1
• Quicken's Growth of $10K chart for the DJI index — 3.72% return
• Quicken's presented values for DJINR beginning and ending values — 6.84%
  • 77903.77 / 72914.63 - 1
• Quicken's Growth of $10K chart for the DJI index — 6.84% return
• DIA in the Growth of $10K chart dividends NOT reinvested — 7.35% return
• DIA in the Growth of $10K chart dividends reinvested — 7.89% return
• Dividend Channel for DIA dividends NOT reinvested — 7.35%
• Dividend Channel for DIA dividends reinvested — 7.89%
• YCharts ^DJITR Total Return — 8.20%
  • 92630.57 / 85602.90 - 1

I don't know how Quicken's source for NET TOTAL RETURN is calculated to get the values that become 6.84%.

Dividend Channel seems to be computing returns the same way Quicken is when considering dividends paid simply as cash (7.35%) or reinvested (7.89%).

I don't know how YCharts is getting their TOTAL RETURN of 8.20%

The figure below compares the Growth of $10K charts for this period as DIA with dividends reinvested (top, yellow dots, 'My Account' line), Index:DJINR (just lower, green dots) and 'normal', no-dividend DJI Dow (bottom, brown dots).

My conclusions:

• The available indices in Quicken that include dividends are reasonable representations more comparable to actual investor investments that pay dividends. There can still be variations — the differences between Quicken's DJINR (6.84%), DIA not reinvested (7.35%), DIA reinvested (7.89%) and YCharts ^DJITR (8.20%) is not clear to me. It would seem DJINR is likely considering dividends paid but not reinvested and YCharts ^DJITR is considering dividends reinvested, but I cannot validate that as fact.
• The index variations between dividends included and not included for the S&P 500, NASDAQ Composite, and Russell 2000 are similar to the variation for the Dow.
• Quicken's basic procedure for developing that chart is valid for this type of relatively simple case with dividends paid or reinvested and not other significant additions or removal to the holdings. in "My Accounts". I would expect similar 'good' results with any collection of securities and accounts with those same basic simplicities. It is when significant additions and removals as either cash or securities take place that the procedure falls apart and potentially misrepresents. Of course, "significant" is an important, very undefined concept in this context.

Chris_QPW

I have a fundamental question. Is even possible to do the calculation "right" when there are "significant" additions or removals?

In other words, does anyone know if this is just a shortcoming of Quicken's implementation or the fact that the calculation can't be done at all.

Jim_Harman

@Chris_QPW et al,

I definitely agree that Quicken should include total return indexes rather than or perhaps in addition to the price-only indexes that it currently uses. In addition, on the Growth of $10,000 chart, the current S&P 500 index legend should have a * next to it referencing the note below the chart, because, like the other indexes, it does not include dividends.

The issue of the Growth of $10,000 chart when there are additions or removals was discussed at length in an Idea post which has now been archived, but I have repeated and updated the data I presented there in this recent discussion.

https://community.quicken.com/discussion/7939992/investment-performance

The key take-away is that the Growth of $10,000 is supposed to be a time-weighted return calculation, which is a good way to compare the performance of different portfolios and securities. It is different from the IRR calculation that the Investment Performance Report uses. Unfortunately, Quicken's calculation is flawed in a way that throws it off if there are significant additions or withdrawals, especially near the beginning of the period.

Chris_QPW

@Jim_Harman Thanks.