investment value

[John Ralls]

> On Mar 25, 2015, at 10:57 PM, Gary Holtum <diamondhranchqh at earthlink.net> wrote:
> 
> I have set up long term investment accounts that are managed stock and bond
> and index funds. The value of these funds change as the market changes. 
> 
> I want to update the current market total value, monthly as I receive
> statements. How would I make these adjustments? What accounts do I use to
> show the increase or decrease in value?

Not in accounts, in the pricedb. That separates the possibly taxable buy and sell transactions from market changes and to evaluate investment performance.

How you do it depends on how you do your taxes and whether you want to use online price quotes.

The easy way is to treat each account like a mutual fund: Create a fake security, buy a convenient number of units at the appropriate price, and record aggregate value in the price editor at every statement.

The more accurate way is to create a separate sub-account for each security and record every buy and sell the broker/manager makes, just as you would if you were managing the account yourself.

The trade off is accuracy, particularly at tax time. If your broker/manager sends you a document that aggregates the gains and income for the year you can safely use the simpler method, but if you have to account for each sale on your tax return then you're better off with the more accurate approach. Online price retrieval, and therefore mostly automatic pricing of your portfolio, works only if you're accounting for the actual amounts of real securities.

> Also, how do I handle additional investments or withdrawals?

With the simple method, treat them as purchases and sales of the fake security; with the accurate method, they're just deposits and withdrawals in the accounts cash balance.

You'll also want to record as expenses (and decreases in value) the monthly wrap or management fees and any dividend or interest income. With the accurate method those will just be reductions and additions to the cash balance; with the easy method you'd book fees as an increase in the basis and dividends as a reduction: Cash in or out without changing the number of units.

Regards,
John Ralls