Fund Manager
PORTFOLIO MANAGEMENT SOFTWARE
Contact Us

Question about Portfolio Performance Report

Questions on using, creating, or understanding data in Fund Manager reports.

Postby ACuriousInvestor » Thu Nov 15, 2018 7:55 am

Hi Mark,

I have a 6-month CD that I held for half a year and then sold. I recorded the purchase of the CD as the purchase of shares at $1 per share. I recorded the monthly interest as interest income distributions. Then, I recorded the sale as a sale of the shares at $1 per share.

I'm confused because the gain and yield in the Portfolio Performance report are both N.A. Did I record something incorrectly?
ACuriousInvestor
 
Posts: 11
Joined: Wed Jan 03, 2018 11:13 am

Postby Mark » Thu Nov 15, 2018 9:57 am

Hi ACuriousInvestor,

You recorded the transactions correctly. The NA figures may be from either you not owning shares over the entire period being reported on, or insufficient pricing data to interpolate a missing price, even though it is always 1. To find out, use "Help / Logs / Report Calculation..." and you should get an explanation.
Thanks,
Mark
Fund Manager - Portfolio Management Software
Mark
Site Admin
 
Posts: 11253
Joined: Thu Oct 25, 2007 2:24 pm
Location: Chandler, AZ

Postby ACuriousInvestor » Thu Nov 15, 2018 10:32 am

Thanks. That helps. One additional performance question: I entered two bonds that have the same interest rate. One was purchased in 2002 and the other in 2017. But they show different TWR (end) and ROI (end). Here is the data:

Bond 2002 - interest rate 3.5% - 2018 YTD TWR 2.82, 2018 YTD ROI 2.82
Bond 2017 - interest rate 3.5% - 2018 YTD TWR 3.48, 2018 YTD ROI 3.48

Since there have been no changes in the bonds since purchase, should their 2018 numbers be the same?

As always, thanks for the help.
ACuriousInvestor
 
Posts: 11
Joined: Wed Jan 03, 2018 11:13 am

Postby Mark » Thu Nov 15, 2018 5:47 pm

Hi ACuriousInvestor,

A couple things that could cause this:

- Make sure you have a price at the beginning of the yield term, and they are the same. So, YTD means you need a price on 12/31/17 and also for the ending report date. Look in the Data Register under the "Prices" data type. Verify both beginning and ending prices.

- If you are using accrued interest in your calculations, the maturity date affects how much accrued interest would be included. So, if your 2 bonds have different maturity dates that would make a difference. You can turn on/off the option to include accrued interest in yield calculations at "Options / General Preferences... / Yields / Include Accrued Interest in Yield Calculations".
Thanks,
Mark
Fund Manager - Portfolio Management Software
Mark
Site Admin
 
Posts: 11253
Joined: Thu Oct 25, 2007 2:24 pm
Location: Chandler, AZ

Postby ACuriousInvestor » Sat Dec 15, 2018 8:34 am

Thanks. I needed to update the prices. That helps.

I guess that I'm still confused though. I have a Series EE bond, purchased in 2002, that essentially pays 3.5% for 20 years (I know that the reality is more complex, but let's use this example because it is simple). I have set it up as a bond, with a coupon rate of 3.5% gathering accrued interest. Which report/column in Fund Manager should display that 3.5% return?

When I look at %Gain and Yield in the Portfolio Performance Report, they both are 2.09%, which seems to be the amount of accrued interest for the year divided by the accumulated value of the bond. The Investment Performance report also reports 2.09%. The ROI Yield report and the Time-Weighted Return report both say N.A.

Sorry for the newbie questions. I'm still learning the system.
ACuriousInvestor
 
Posts: 11
Joined: Wed Jan 03, 2018 11:13 am

Postby Mark » Sat Dec 15, 2018 10:05 am

Hi ACuriousInvestor,

Assuming you don't have any transactions within the yield term, the yields include both change in price, plus your earned interest here. If you want to see the assigned coupon rate (3.5%) you can see this in a Bond Summary or Custom report. I think you're trying to get the performance (ROI/TWR), and see it match the 3.5% number though. In this case, make sure you have your interest payments recorded. It will only be exactly 3.5% if your bond's closing price does not change between the starting/ending yield term, you don't have any other buy/sell transactions recorded, and your yield term runs from coupon payment to coupon payment, or you include accrued interest.

When you're looking at these different yields, it is important to note the yield term (starting/ending dates), as they can be different in different reports. Once you know your yield term date range, look in the Data Register under the "Prices" data type to see what prices you have recorded for the beginning/ending of the yield term, as this will affect the yield. For example, if you have a yield term from 1/1/18 - 12/14/18 you would look at the pricing for 12/31/17 (closing the day prior is used for starting price on beginning date) and 12/14/18. Also, anytime you get an N/A, use the "Help / Logs / Report Calculation..." to understand why. I would focus on a single calculation, so you can understand it before running multiple different reports and comparing. To help understand it, you can also turn on yield logging. See "Options / General Preferences... / Yields / Log Calculation Details for ROI/TWR Yields". To understand the yield logs, you can find the equations used here:

https://www.fundmanagersoftware.com/help/yields.html

(click on ROI or TWR for each equation, and some examples. The same equations are used in the logs, so you can check each component, and understand how the numbers are being calculated.)

If you want more clarification, please send a very specific example, including what transactions you have recorded, the beginning/ending yield term dates, and what your beginning/ending prices are, the yield you're seeing, and the equivalent equation from the log file. I can try to help clarify.
Thanks,
Mark
Fund Manager - Portfolio Management Software
Mark
Site Admin
 
Posts: 11253
Joined: Thu Oct 25, 2007 2:24 pm
Location: Chandler, AZ

Postby ACuriousInvestor » Sun Dec 16, 2018 3:13 pm

Thanks for the additional clarification - very helpful! Yes, you are correct, I'm trying to get the performance (ROI/TWR) and match the 3.5% return number.

I've attached screen shots of my Portfolio Editor Screen, my Investment Properties Screen Income, my Data Register screen, my Prices screen and four reports showing return figures. To keep things simple, this is the setup:

1. A single bond purchased in October of 2002 with a coupon rate of 3.5% and a 30 year term
2. Bond is entered as a purchase of 25 shares, price $100 on 10/01/2002
3. No interest payments hand entered
4. Accrued interest configured (accrued interest shows as total $1,418.23 and 1 year $87.50)
5. Prices entered for 11/30/17, 12/31/17, and 11/30/18, per your instructions

All the reports for 12/01/2017 to 11/30/2018 show a consistent return of 2.29%. I know that I must be making a simple mistake somewhere, I just can't figure it out. Thank you again for helping me learn how to use the software more effectively.
Attachments
FundManager - Single Bond Example.pdf
(125.48 KiB) Downloaded 233 times
ACuriousInvestor
 
Posts: 11
Joined: Wed Jan 03, 2018 11:13 am

Postby Mark » Mon Dec 17, 2018 10:29 am

Hi ACuriousInvestor,

Thanks for the details. I was able to reproduce your case here. The interest that you're accruing is based off the initial purchase of $2,500, which is different from the starting value in all the yield terms, except the first year. If you look at the very first year, you will see you earn the 3.5% rate, as it is based off the $2,500, before you accrued interest. However, if you look at later years (as you've done in your example from 12/1/17-11/30/18), you are still earning the same amount of interest in a year ($87.50 = 3.5% * $2,500), but it is a relatively smaller percentage compared to the total value with accrued interest up to that beginning point.

First year: $87.50/$2,500 = 3.5%
~2018 year: $87.50/$3,826.84 = 2.3%

Another way to think of it is that you're not getting 3.5% on your accrued interest (it isn't compounding). When you haven't accrued any interest, you're earning the full 3.5%, but once you've accrued interest you're earning a lower rate considering the accrued value. If you look at the yield log file, you will see equations for the first year versus the last year, like this:

First year:
Code: Select all
ROI Equation for investment "BondTest": Yield Result (i) = 3.50

Dates: 10/2/2002 - 10/1/2003
Including Accrued Interest: ON
Including Account Fees: ON
Yield Period in Years: 1.000000
End_val + Dist(s) - Inv(s) - Beg_val = 0

2587.500000 - 2500.000000(1 + i)^1.000000 = 0


Last year from your example:
Code: Select all
ROI Equation for investment "BondTest": Yield Result (i) = 2.29

Dates: 12/1/2017 - 11/30/2018
Including Accrued Interest: ON
Including Account Fees: ON
Yield Period in Years: 1.000000
End_val + Dist(s) - Inv(s) - Beg_val = 0

3914.340278 - 3826.840278(1 + i)^1.000000 = 0
Attachments
BondTest.png
Reports for first and current years
BondTest.png (21.49 KiB) Viewed 3392 times
Thanks,
Mark
Fund Manager - Portfolio Management Software
Mark
Site Admin
 
Posts: 11253
Joined: Thu Oct 25, 2007 2:24 pm
Location: Chandler, AZ

Postby ACuriousInvestor » Mon Dec 17, 2018 11:09 am

Wow, thanks for taking the time to unravel the root cause. Your explanation unlocked something for me. So, in this case, the bond SHOULD be compounding. In 20 years, the value of the bond should double from $2,500 to $5,000, and it does that by compounding at a 3.5% rate.

I did a quick calculation in excel, and the accrued interest in 2018 should be $1,853. That's much higher than the accrued interest of $1,414.34 that's in the program. The $1,853 puts in on course to double in 20 years.

Is there a way to set up the bond so that it compounds on both the principal and the accrued interest? Is there a setting that I can tweak?

Thanks again!
ACuriousInvestor
 
Posts: 11
Joined: Wed Jan 03, 2018 11:13 am

Postby Mark » Mon Dec 17, 2018 11:53 am

Hi ACuriousInvestor,

Sorry, there is no option to include interest on accrued interest. In your calculation, are you using a certain compounding period? Yearly maybe? If so, one option may be to change your settings to pay interest yearly, and go ahead and book the interest payments, and mark them as reinvested, so you end up owning more shares each year. This will increase the amount of interest, and should reflect what you're trying to model.
Thanks,
Mark
Fund Manager - Portfolio Management Software
Mark
Site Admin
 
Posts: 11253
Joined: Thu Oct 25, 2007 2:24 pm
Location: Chandler, AZ

Postby ACuriousInvestor » Wed Dec 19, 2018 4:43 pm

Got it. Thanks for the help, Mark!
ACuriousInvestor
 
Posts: 11
Joined: Wed Jan 03, 2018 11:13 am


Return to Reports

Who is online

Users browsing this forum: No registered users and 6 guests

FundManagerSoftware.com | Search | Site Map | About Us | Privacy Policy
Copyright © 1993-2024 Beiley Software, Inc. All rights reserved.
cron