Add and Remove shares in Investment performance report

[Alvaro Soliverez]

Hello all,
I have a question. Nowadays, for performance calculation, only the starting balance, end balance, buy and sell splits are taken. Dividend reinvestment, add and remove shares are not considered.

In my case, when I started using KMyMoney I already had some stocks, so I used Add shares to make the starting balance, because there is no option to enter a starting balance for stocks.

I later sold those, so now the performance report is not all that accurate for that stock.

Should we count the add and remove shares splits to calculate performance? What do you use those for?

Regards,
Alvaro

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[Fernando Vilas-2]

On Saturday 19 July 2008 11:08:48 Alvaro Soliverez wrote:

> Hello all,
> I have a question. Nowadays, for performance calculation, only the starting
> balance, end balance, buy and sell splits are taken. Dividend reinvestment,
> add and remove shares are not considered.
>
> In my case, when I started using KMyMoney I already had some stocks, so I
> used Add shares to make the starting balance, because there is no option to
> enter a starting balance for stocks.
>
> I later sold those, so now the performance report is not all that accurate
> for that stock.
>
> Should we count the add and remove shares splits to calculate performance?
> What do you use those for?
>
> Regards,
> Alvaro

I used "add shares" transactions to represent splits before KMM could handle
stock splits.  I think they should be counted in the calculations.  If you
are comparing today's price to the price you paid, you would want a weighted
average of all purchase prices, so a 2:3 split would add a few shares at $0,
so it would definitely affect the average price paid.

There should probably be a way to enter a starting balance for investments, if
nothing else, then to cover the case of owning them before starting to use
KMM and not wanting to backfill accounts all the way to the purchase date.

--
Thanks,
Fernando Vilas
fvilas@...


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[Bob Ewart]

Fernando Vilas wrote:

> On Saturday 19 July 2008 11:08:48 Alvaro Soliverez wrote:
>> Hello all,
>> I have a question. Nowadays, for performance calculation, only the starting
>> balance, end balance, buy and sell splits are taken. Dividend reinvestment,
>> add and remove shares are not considered.
>>
>> In my case, when I started using KMyMoney I already had some stocks, so I
>> used Add shares to make the starting balance, because there is no option to
>> enter a starting balance for stocks.
>>
>> I later sold those, so now the performance report is not all that accurate
>> for that stock.
>>
>> Should we count the add and remove shares splits to calculate performance?
>> What do you use those for?
>>
>> Regards,
>> Alvaro
>
> I used "add shares" transactions to represent splits before KMM could handle
> stock splits.  I think they should be counted in the calculations.  If you
> are comparing today's price to the price you paid, you would want a weighted
> average of all purchase prices, so a 2:3 split would add a few shares at $0,
> so it would definitely affect the average price paid.
>
> There should probably be a way to enter a starting balance for investments, if
> nothing else, then to cover the case of owning them before starting to use
> KMM and not wanting to backfill accounts all the way to the purchase date.
>
>

I agree with Fernando.  I used "add shares" for the stock that I had
acquired before KMM.  Most of them were acquired over a 25 year period,
one share at a time.  Backfilling would be very difficult.

I have also used "delete shares"--"add shares" to transfer stock from
one brokerage to another.

Another use for "add shares" is for shares received from a bequest.

In all cases, you need to be able to determine the average price paid so
that you can show the profit/loss for tax purposes when selling the stock.

--
Bob


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[Alvaro Soliverez]

Ok, I think we all agree that the add and remove actions have to be accounted for, the issue lies in how to calculate the prize for those shares.
The easiest, but I don't know if the most correct one, is to use the stock price for that day. If you have used it for a split, the price would be that of the split stock, so that wouldn't be a problem, I think.

Any other ideas?

On Sat, Jul 19, 2008 at 2:15 PM, Bob Ewart <bob-ewart@...> wrote:

Fernando Vilas wrote:
> On Saturday 19 July 2008 11:08:48 Alvaro Soliverez wrote:
>> Hello all,
>> I have a question. Nowadays, for performance calculation, only the starting
>> balance, end balance, buy and sell splits are taken. Dividend reinvestment,
>> add and remove shares are not considered.
>>
>> In my case, when I started using KMyMoney I already had some stocks, so I
>> used Add shares to make the starting balance, because there is no option to
>> enter a starting balance for stocks.
>>
>> I later sold those, so now the performance report is not all that accurate
>> for that stock.
>>
>> Should we count the add and remove shares splits to calculate performance?
>> What do you use those for?
>>
>> Regards,
>> Alvaro
>
> I used "add shares" transactions to represent splits before KMM could handle
> stock splits.  I think they should be counted in the calculations.  If you
> are comparing today's price to the price you paid, you would want a weighted
> average of all purchase prices, so a 2:3 split would add a few shares at $0,
> so it would definitely affect the average price paid.
>
> There should probably be a way to enter a starting balance for investments, if
> nothing else, then to cover the case of owning them before starting to use
> KMM and not wanting to backfill accounts all the way to the purchase date.
>
>

I agree with Fernando.  I used "add shares" for the stock that I had
acquired before KMM.  Most of them were acquired over a 25 year period,
one share at a time.  Backfilling would be very difficult.

I have also used "delete shares"--"add shares" to transfer stock from
one brokerage to another.

Another use for "add shares" is for shares received from a bequest.

In all cases, you need to be able to determine the average price paid so
that you can show the profit/loss for tax purposes when selling the stock.

--
Bob


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[Bob Ewart]

Alvaro Soliverez wrote:

> Ok, I think we all agree that the add and remove actions have to be
> accounted for, the issue lies in how to calculate the prize for those
> shares.
> The easiest, but I don't know if the most correct one, is to use the
> stock price for that day. If you have used it for a split, the price
> would be that of the split stock, so that wouldn't be a problem, I think.
>
> Any other ideas?
>
><snip>

The only way that could work for the add is to manually enter a price
for the date in the add.  That would be a problem for tracking price or
net worth over time.

I think a better way would be to put a price/share on the add itself.

Consider two cases that happened to me:

1. Stock that was accumulated over a number of years before KMM.  After
splits the effective average price was $5.20 but the current price when
I opened the brokerage account was around $140.

2. Some time later I transfered the stock to a different account.  Again
the current price was around $150, but the effective purchase price was
still $5.20.




--
Bob


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