Re: Cash Contributions

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Posted by Mark on September 26, 2007 at 16:42:32:

In Reply to: Re: Cash Contributions posted by Al Baird on September 26, 2007 at 16:03:11:

: : : I am manually creating a portfolio, where I enter the portfolio value at the end of each month. Some months I have contributed cash to the portfolio to buy more stocks. What do I do to calculate the yield, given that new money is being added?

: : Hi Al,

: : Contributing cash should not throw off your yields. How are you entering your portfolio value at the end of each month?

: : Thanks,
: : Mark
: : --
: : Fund Manager - Portfolio Management Software

: I created a sub-portfolio and manually entered the value at the end of each month. If during one of those months, I added a large amount of cash, it seems like it would appear that the value of the stock shot up by that amount for that month. Is there not a difference between my stocks increasing in value by 10% in one month and my adding 10% more money to my investment?

: Al

Hi Al,

How are you entering your portfolio value at the end of every month?

"Portfolio value" is not a direct input. You can enter transactions and pricing information. Yes, there is a difference in your portfolio gaining 10% and you contributing 10%, which is why it is important to understand what you're entering to modify your portfolio value at the end of every month. I can guess that maybe you are increasing your portfolio value using a reinvested distribution. Deposits into your portfolio would be buy transactions. These 2 things will have different impacts on the yields. A positive reinvested distribution increases your yield. A cash deposit only starts affecting the yields after the date of the deposit, based on how much it increases or decreases.

Thanks,
Mark
--
Fund Manager - Portfolio Management Software

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