Gain (btw)

[OnYourOwn]

Having problems with Gain (btw) values. Only problem is when I have a transfer-in or -out. I suspect this problem is related to the accounting method, but I tried all three methods.

This is a 401(k) account.

I'm looking for Gain(btw)=End Value-Beg Value-Purchases(OOP)-Transfers-in and Transfers-out. Just a straight math equation, which is used in historical 401(k) reports.

The 401(k) reports I'm comparing to not correspond to what Fund Manager produces as Gain(btw), whenever there is a transfer.

From past experience, I missing something again.

[Mark]

Hi OnYourOwn,

The formula is:

Gain (btw) = End_Value - Beg_Value + Distrib. - Invested

If you have a Transfer In transaction within this period, then it will affect both the End_value and the Invested amounts. The End_Value will be affected because there are more shares owned on the ending date. The Invested amount includes the OOP cost of the transferred in shares. You enter this OOP cost when recording a transfer in.

A Transfer Out is similar. It also affects both the End_Value and Invested amounts. The Invested amount is reduced by the OOP cost of the shares transferred out. If you want to see the OOP cost for a transfer out transaction, edit this transaction, and it is displayed in this dialog. FM automatically calculates the OOP Cost Basis for transfer out transactions.

[OnYourOwn]

I use Transfer between, which Fund Manager enters the OOP cost.

What I'm trying to do is duplicate some historic 401(k) reports.

These reports define gain(btw) = End Value - Begin Value - Purchases - (Transfers-in + Transfers-out).

I haven't been able to duplicate this Gain definition. Do you know if Fund Manager is able to duplicate this Gain definition ?

[Mark]

Hi OnYourOwn,

Your equation for %Gain shows %Gain reducing when you have a Transfer Out. This is not how Fund Manager calculates %Gain, and doesn't really make sense. Everything else in your equation is the same as Fund Manager's except in Fund Manager a Transfer Out would have a positive effect on %Gain. This is the equivalent of taking a withdrawal or receiving a distribution, the net effect is positive on %Gain. It is money you took out, so should be credited to your gain. Taking a look at an example may help:

Say we started off with nothing. To keep things simple, assume the share price stays constant at $1. If we buy $1000, and Transfer Out $10, we would end up with an ending value of $990. Since the share price stays constant at $1, the gain should end up at $0:

Gain = End_value - Beg_value + Distrib. - Invested

End_value = $990
Beg_value = $0
Distrib. = $0
Invested = $990 ($1000 purchase - $10 Transfer Out)

Gain = 990 - 0 + 0 - 990
Gain = $0

If we use your equation with this example:

gain(btw) = End Value - Begin Value - Purchases - (Transfers-in + Transfers-out)

gain(btw) = 990 - 0 - 1000 - (0 + 10)
gain(btw) = -20

We end up with a loss of $20, even though the share price never changed, and we didn't lose anything if you look at the whole picture.

To answer your question, we don't have an equation that does the math the way your gain equation is written.

[OnYourOwn]

Mark,

What "doesn't really make sense" is my explanation. Let me give you an example from a Quarterly 401(k) statement and a Fund Manager Report.

Share values = $1.00. Gain = Gain(btw)

401(k) Statement:
EV - BV - OOP - (Tran-In + Tran-Out) = Gain
Fund 1: 0.00 - 0.00 - 1000.00 - ( 0.00 + -1000.13) = 0.13
Fund 2: 7954.21 - 6305.89 - 301.74 - ( 1000.13 + - 0.00) = 346.45

Fund Manager Report:
Fund 1: 0.00 - 0.00 - 1000.00 - ( 0.00 + -1000.13) = 0.00
Fund 2: 7954.21 - 6305.89 - 301.74 - ( 1000.13 + - 0.00) = 346.58

As you can see the net Gain(btw) is the same, but which Fund records the gain is different. Note: Transfers-Out are negative numbers, so minus a negative number would result as an addition. (I believe this caused my explanation to result in "doesn't really make sense").

[Mark]

Hi OnYourOwn,

You're right, the negative transfer out numbers make the equations equivalent. Maybe the best thing to do is send me these 2 investments, and a date range, so I can reproduce the figures here. Maybe this will help me spot the problem, as it seems we are using the same equation, so they should match. You can just go to our email contact form, and submit a simple message. You will then see a regular email where you can attach these 2 investment (*.dat) files.

[OnYourOwn]

Thanks ... will do.