IRR accuracy vs. Cost Basis accuracy

Mike Judd

I'm sure this has been discussed elsewhere. Quicken has an annoying quirk in assigning a cost of $1 per share for cash and money market accounts. On the surface, this makes sense as these are liquid assets and their NAVs are in fact $1. The issue is brokerages assign a cost basis of $0 for these accounts. This is standard accounting and is consistent across all brokerages I do business with. Straight up cash balances can't have their cost basis changed in Quicken, but money market accounts like MSUXX or high yield savings accounts through brokerages like MSPBNA can. When you force their cost basis to $0, that money has to go somewhere, e.g., XOut. This action contaminates the IRR and pushes it artificially high. I'm pretty much resigned to the fact that in Quicken you can have accurate IRR or cost basis for cash/money market accounts, but not both. If anybody has any words of wisdom, it would be appreciated.

Jim_Harman

If your cash is being held in a money market fund and money in and out of the fund is being recorded as Bought and Sold, the share price should be $1.00. Reinvested dividends should also have a price of $1.00.

I have found that sometimes quotes for money market funds are downloaded as zero, which in turn makes the value of the fund be zero. You can prevent this by going to the Security List and un-checking the Download Quotes box for those funds. Then click on the fund name to open the Security Detail view, click on More and select Edit price history. Delete any entries where the price is zero.

If the cash is being held in the Quicken account's Cash balance and there are interest or dividend payments for the cash, you should record them as Div or IntInc for a fake security with a share price of 1.00 but zero shares held. You may need to edit the downloaded transactions to do this. In this case, be sure to include the fake security and "No security (Includes Cash)" in the report's Security selection.