Account level Amount Invested and ROI (%) are calculated incorrectly when a security is sold
There has been much discussion about the "Amount invested" and "ROI (%)" columns in the Investing > Portfolio views. Quicken defines ROI as Return / Amount Invested as defined below. When calculated correctly, ROI is a useful measure of short term investment performance, but when a security in an account is sold, Quicken includes the proceeds of the sale in the account's Amount invested, causing the account level ROI calculation to be wrong or at best useless.
, Quoting the in-product Help,
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Return represents the total return of a security: the current market value, plus the income taken out as cash, plus cash received from sales of shares, minus the amount invested.
Reinvestments are not explicitly added to the return, because they contribute to the market value, which is already factored in.
Amount invested = Starting balance + amounts added
Amount invested is the actual dollar amount that you've invested in a security to date. Amount invested includes any expenses (such as commissions and fees) for that security. It does not include reinvested amounts, such as reinvested dividends, interest, or capital gains distributions.
By default, Quicken calculates the amount invested over your entire account history. Quicken can also report the amount invested for a specified date range. Change the date range by changing the Portfolio's From or As of date or by using the standard Portfolio columns Amount Invested 1-/3-/ 5-Year and Amount Invested YTD.
When you change the Portfolio date range, Quicken calculates the amount invested during that period to be the difference between the beginning amount and ending amount of the date range:
- Beginning amount: For shares purchased before the beginning date, Quicken uses the market value on the beginning date. For shares purchased after the beginning date but before the ending date, Quicken uses the actual cost of those shares.
- Ending amount: Quicken uses the market value on the date you specify. (Shares purchased after the ending date are not included in the amount invested.)
When the Amount Invested changes, so do the calculations for Return and ROI (%), which are based on the amount invested.)
Amount invested doesn't decrease when you sell shares (unless you sell all shares of a given security—then it goes to zero), whereas cost basis does. If calculations such as ROI appear lower than you would expect, it could be because the amount invested includes the cost of shares you no longer own.
--------------------------------------------------------------------------------In simplifed terms,
Return = Ending balance + amounts removed - Amount invested
ROI = Return/Amount Invested
This calculation works correctly for a single security, but it appears that Quicken calculates the Amount Invested and thus the ROI wrong on the account level when there are sales.
Consider this example:
An account starts with $10,000.
On 2/1 we buy 500 shares at $10 for a total of $5,000
On 3/1 we sell 400 shares at $11 for a total of $4,400, leaving 100 shares worth $1,100.
and the price stays at $11 for the rest of the period.
The ending account balance is $9,400 in cash plus $1,100 in the stock or $10,500.
The Investing > Portfolio view looks like this
Looking at just the stock,
the Amount invested is $5,000
the Return is $1,100 + 4,400 - 5,000 or $500
and the ROI is 500/5000 or 10% which is correct.
Looking at the account as a whole, I think the Amount invested should be $10,000 and the Return should be $10,500 - $10,000 or $500 for an ROI of 500/10000 or 5%. Internal purchases and sales should not affect the account's ROI.
But Quicken is apparently adding the $4,400 proceeds from the sale to the initial cash of $10,000 to get $14,400 as the Amount invested. This causes the account level ROI to be reported as 500/14400 or 3.47%, which is incorrect.
