Advanced report rate of return

[John Ralls]

On May 13, 2013, at 12:23 PM, Stefano M Canta <cantastefano at gmail.com> wrote:

> Hello,
> 
> You can do the transaction buy selling 3000-USD worth of stock A, and use
> the cash in the brokerage account to buy stock B.
> Or, which is equivalent, move 3000-USD worth of stock A (which will be
> 3000/3100 of the amount of shares I have) to stock B. It's the same
> operation.
> What I am saying is that the 3000 USD never left the brokerage, but they
> are just rebalanced between investments.
> The total money in column should take into account the money that goes in
> the brokerage account, not the sum of the money that goes into each stock
> separately.


Your brokerage is a container account. It has a cash account and a collection of stock accounts. Barring a 
corporate action -- merger, spinoff, or rename specifically designated as a non-taxable event -- the only way to
change your holdings from A to B is to sell A and buy B, with the proceeds of sale going to the cash account in between. The difference between the cost and proceeds of A should be accounted for in a separate pair of splits. The details are explained in the Concepts Guide.

Any other way of accounting for it will screw up the Advanced Portfolio Report, and might lead you to report it incorrectly
to your tax authorities. (In the USA, there's one way of holding a brokerage account where you don't need to keep track of the capital gain or loss from the sale of A, called a Roth IRA. The Advanced Portfolio Report doesn't know about those.)

Regards,
John Ralls