Which is the best account type?

Question

Which is the best account type for tracking a collateralized debt income fund where qtrly dist's are Ord Income to the owner and automatically reinvested in the fund.  Also would I set up a separate security for this to keep track of basis and income….etc.? I am thinking there is probably a couple different ways to do this but looking for the most efficient as I will have to be manually entering transactions for (including accruing monthly estimates of income for the company that owns this).  Have not done anything like this before, simply worked with individual stocks using brokerage accounts.  Thanks in advance for suggestions and assist.

Jim_Harman · Answer

The challenge is that you want Quicken to accurately track your cost basis, dividend income, and current market value. I think the $1.00 per share approach can easily track the income and market value correctly, but it loses track of the cost basis when you add and remove shares to get the correct market value. Trying to track all three values gets complicated with reinvested dividends unless there is a published price per share.

ATCE · Answer

Technically yes there may be an opportunity to add to the investment if demand is in excess of capital raised (and reinvestment distribution funds left by most members in the fund so far) as the loans are short term in nature and turning all the time (the fund also carries a line of credit to fulfill short term needs as the goal is to have very little cash not loaned out).  As far as redemption, yes can request some or all of your equity interest with conditions tied to this as to timing and amounts.  The $1 share was what I was thinking as well, but wanted to see if there was some other creative way to deal with in Quicken.  Thank you for your time on this subject.

Jim_Harman · Answer

OK, then is it a one-time investment, or will you be making additional investments over time? Can you sell part of your membership interest, or is it all or nothing? Presumably its value will change over time and you might get more or less than your initial investment when you decide to sell.

There may be a better way to do this, but I would be inclined to say that if your initial investment is $X, you should record it as buying X shares of the special security at $1.00 each for the amount of your initial investment. Add or remove shares at $1.00 as the value changes per the statements you receive. Record the income you receive as reinvested dividends at $1.00 each. You may have to make some adjustments when you eventually sell to make Quicken's capital gain calculation correct.