Modified Dietz TWRR

[dmspiff]

Hi Mark,

I apologize as I asked you about this by phone and now that I am ready to try it out I can't remember how to do it. I will use the Pro version to make performance calculations (modified Dietz TWRR) by entering the monthly values of each account and any cash flows coming in or going out (and would like to use fees as a separate line, if possible). I set up a portfolio for each account and assigned a value of 1$ per share but then couldn't figure out how to update the price values (manually or quickly via CSV import) and the cash flows going in and out of each account.

Much obliged for a written response.

Mark

[Mark]

Hi Mark,

To do this, create your investment. Treat the investment like a cash account, where you keep the share price fixed at $1. To start the account, record a buy of X shares at a price of $1, where X is the value of the account on the starting date. At the end of each month, record a reinvested distribution for the change in market value, again at a price of $1 and with a share quantity equal to the change. If there is a withdrawal, record a sell. For a contribution, record a buy.

For example, let's say you want to start recording as of 1/1/2010 and the market value on that date is $1000. Record a purchase of 1000 shares at a price of $1. Now, let's say at the end of January the market value has gone up to $1100. Record a reinvested distribution of 100 shares at a price of $1. You now own 1100 shares at a price of $1.

Let's say on Feb 15th they deposited another $1000, and at the end of February, the market value is now $2150. Record a buy on Feb 15th for 1000 shares at a price of $1. Record a reinvested distribution for the end of February of 50 shares at a price of $1. The 50 number is the change due to market changes (2150 - 1000 contribution - 1100 starting value at beginning of the month).

For months where the market value goes down, you still record the reinvested distribution, but the shares/value will be negative.