%Gain-I

[ANNISB]

I'm sure this is a basic user error and I hope somebody can provide some insight for me.

I closed out two mutual funds by entering redemptions for the total value of each. I then created a new investment, a money market account, and entered a purchase in the amount of the two funds I had just liquidated.

Now when I view a "Portfolio Performance" report it shows an incorrect %Gain-I value (too low). BUT, if I close the money market investment and leave the others open it calculates properly.

Did I do something wrong closing out those two funds and entering cash into a money market? I simply want to view my report showing all investments (including the money market) and know what my performance has been for the specified period of time. Oh, I'm using personal version 7.6.

[Mark]

Hi Annisb,

I suspect the problem is a misunderstanding of how %Gain-I works... Many of the %Gain numbers can be misleading, depending on the timing of your transactions. None of the %Gain numbers are time weighted. If you want a time weighted number, use the ROI yields instead. You can read the definition of %Gain-I here:

http://www.fundmanagersoftware.com/help ... gaini.html

Notice that "Purchases" is in the denominator, so all of your purchases, no matter when they happened will be included in the denominator. If you don't want to include these, you can look at the %Gain-V number instead, but again here these are not time weighted. It doesn't take into account when that purchase was made. %Gain-I always includes the purchase if it is within the time period being reported on. %Gain-V only uses the beginning value in the denominator. Unless you had no transactions within a period, you are better off using the yield values, as these are time and value weighted, giving a better measure of performance.

[ANNISB]

Thank you for your response -

I don't believe I have misunderstood the %Gain-I calculation. I reviewed it thoroughly before submitting my post and what you've told me coincides precisely with what I understand to be the means by which it is calculated.

However...

It's simply not being calculated properly based on the underlying code that supports this definition for the "Portfolio Performance" report - a report I've been using for many years and has been accurate to the Nth degree until my recent activity.

Here's an example scenerio of what can happen improperly:

Let's say I have money distributed between four (4) different mutual funds. I run a YTD "Porfolio Performance" report and note that my %Gain-I performance is negative 11%. I now redeem 100% of a whole fund (one of the four) and it lands in my cash account. I now run the same report and the %Gain-I now shows a value of negative 6%. This will occur whether the money market fund is configured as the portfolio "cash account" or not. The value of %Gain-I should not have changed at all.

Put simply... my portfolio %Gain-I should not vary in the course of a single transaction by simply liquidating a fund and putting it in a cash account. My return, in terms of the %Gain relative to that which I have invested thru the course of the year stays the same!

I'm using Personal version 7.6. Might I find this resolved in a newer version? To be fair, you should understand that I'm a software developer by trade and understand (to some extent) what's happening under the covers.

Thanks again... I've been using your software for years and loved it!

-b-

[Mark]

Hi ANNISB,

In your example the %Gain-I will change. The formula is:

(End_value + dist_distributions + redemptions - purchases) / purchases

In your example, when you sell a fund, you are also buying cash (since you said the funds were deposited into your cash account). This means, the End_value stays the same, the dist_distributions stays the same, and the redemption and purchase numbers both go up by the same amount. Since both the redemption and purchases go up by the same amount, the numerator in the equation stays the same. However, the denominator gets larger, so the overall number will go closer to zero.

[ANNISB]

Yup... you're absolutely right. Thanks!