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OOP and distributed distributions

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

Postby JeanneMarie » Sun Mar 06, 2022 10:03 am

The Help file and the Custom Report Settings dialog seem inconsistent. The former says that out-of-pocket cost ignores reinvested distributions. But the Custom Report Settings dialog says that "out of pocket basis (current)" is
"Total out of pocket contributions (contributions - distributed distributions)... inclusive ... "

To narrow down the question to an example: How does a dividend paid in cash influence out-of-pocket cost? Is it added or deducted from cost basis? (If this seems odd, I agree.)

Or are these "distributed distributions" actually shares? deducted from basis? (at whatever the price was on that day?)

Or are they something else I'm not thinking of? I just know I'm going to feel dumb, but thanks for shedding any light for this amateur,

Jeanne
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Postby Mark » Sun Mar 06, 2022 1:45 pm

Hi Jeanne,

A distribution can be either "reinvested" or "distributed". Distributions can also be of different types (interest, dividends, capital gains, etc). They are money paid out from the investment. A "reinvested" distribution is when the money from that distribution is used to purchase more shares of that investment. A "distributed" distribution is when you take the money. So, yes, the OOP cost doesn't change when you have a "reinvested" distribution, and it decreases when you have a "distributed" distribution. Your OOP cost goes down when you take money out. If the money is just reinvested, you didn't receive any money, so your OOP cost doesn't change.

To narrow down the question to an example: How does a dividend paid in cash influence out-of-pocket cost? Is it added or deducted from cost basis?


To answer your question directly, a dividend paid out in cash will reduce your OOP cost basis.
Thanks,
Mark
Fund Manager - Portfolio Management Software
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Postby JeanneMarie » Mon Mar 07, 2022 7:10 am

Thanks Mark. You reveal how my biases/assumptions/etc. reflect how and where I learned about something. My learning is anchored in taxes. So I never got past reinvesting's increasing basis, never thought that income reduced my cost. Completely blind spot. But I get it; in a way, when I get anything back, it can be thought of as return of my capital.

Told you I'd feel dumb. Now I have to think harder about how to shape and read these reports. More info than you need, but still, thanks,

Jeanne
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Joined: Thu Oct 23, 2014 9:52 am


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