[GNC] Dealing with mutual funds

Mon Nov 11 16:10:24 EST 2024

Hi Richard.

As you might've read in the other thread, I've made some progress and
solved the issue related to VT stocks and the currency account.
Now I am just getting back to you on the last part of this thread:
registering the Forex transaction with splits, including fees. I've now
tried to simulate converting CHF 10.- into USD and adding the fees as
splits.
First of all, in the "CHF Cash" account I enter a transaction called "Forex
CHF.USD", where I put "10" in the "Withdrawal" column. When confirming the
transaction, I'm prompted with the following pop-up window:
[image: image.png]
To me this is perfectly fine: I get asked about the conversion/exchange
rate as I'm transferring CHF into USD.
Now it gets strange to me. Let's assume I have CHF 1.- in fees - I would
edit the transaction I just confirmed, click on "show splits" and then add
a Withdrawal of CHF 1.- (from the same account I'm editing, "CHF Cash"),
for which the other account is "Fees Forex CHF.USD". When I first enter the
withdrawal I again get asked about the conversion rate - whereas if I first
enter the deposit on the "Fees Forex CHF.USD" account, then I can enter the
CHF 1.- withdrawal without GNC asking me for conversion.
Is this normal/expected behavior?

Thanks,
F.
https://www.instagram.com/boniforti_music
https://soundcloud.com/boniforti_music
https://bonny-j.bandcamp.com

Am Mo., 11. Nov. 2024 um 17:35 Uhr schrieb R Losey <rlosey at gmail.com>:

> My answers will be below your items. I'm glad I've been able to be of some
> help.
>
>
> On Sat, Nov 9, 2024 at 5:58 AM Boniforti Flavio <boniforti.f at gmail.com>
> wrote:
>
>> Hi Richard.
>> Now I finally got time to read through your reply and understand/learn.
>> Here is my feedback/reply. Thanks again!
>>
>> *USD Dividends*
>> You're right, it was not at the right place. I moved it under "Income".
>> When I get paid dividends, how should I register this transaction? Do I
>> increase both the "Income:USD Dividends" and the "Assets:IBKR:USD Cash"
>> accounts?
>> As the dividends on IBKR are automatically reinvested, I would then add
>> another transaction, representing the purchase of VT stocks.
>>
>
> Yes; dividends would increase both of those (in accounting jargon,
> however, one of these - the IBKR:USD Cash is a debit and the other is a
> credit)
>
> You could do reinvestments that way; I don't bother... I go to the stock
> and make a "Reinvest Dividends" purchase, with the Income:USD Dividends
> being the "other" account.
>
>
>
>> *Wire transactions*
>> Yes, I do have more than one wire transfer from my Swiss checking account
>> to IBKR. I've added these transactions as "Assets:Swiss Checking Account"
>> --> "Assets:IBKR:CHF Cash".
>>
>> *Forex CHF.USD*
>> When I sell CHF to buy USD (to be able to buy VT stocks in USD), I have
>> to pay a transaction fee. As an example, I exchanged CHF 9,998.- and got
>> USD 11,214.26 for which I paid CHF 1.78 in commissions. This I entered as
>> follows into GnuCash:
>> "Assets:IBKR:CHF Cash" --> "Assets:IBKR:USD Cash" and I verified the
>> exchange rate (which should match the "T. Price" in IBKR). In the above
>> example this was correct (what I see in IBKR's statement is exactly the
>> exchange rate GNC has calculated).
>> I then added a second transaction to register the Forex fee:
>> "Assets:IBKR:CHF Cash" --> "Expenses:IBKR:Forex fees in CHF". Does this
>> sound right? And is there any way to have the fees included into the Forex
>> transaction (like with splits)? I tried this route, but I was being asked
>> about the exchange rate - which in my eyes shouldn't apply, as both the
>> "CHF Cash" account on IBKR and the expenses account "Forex fees in CHF" are
>> in CHF.
>>
>
> What you are doing will work; however, you should be able to do this all
> in one transaction using a split - since it is one transaction, I find it
> better to do it as one transaction with splits instead of two separate
> transactions. (But that is partially preference). As a matter of
> preference, I tend to have exchange rate fees as it's own expense, but it
> is perfectly fine where you have them.
>
> If I read your example above correctly, you reduced your CHF cash by CHF
> 9999.78 CHF, of which CHF 1.78 is the transaction fee and 9998 is converted
> to USD 11,214.26. Thus, to do this in one transaction, you'd have the
> following three-way transaction:
>
> 1) Decrease IBKR:CHF Cash by 9999.78
> 2) Assign CHF 1.78 to the expenses "Forex fees" - there are "shares" and
> "price" columns, but you can ignore these and just enter the amount. I
> think there may be examples online when I was trying to figure out how to
> do this.
> 3) Have the remaining CHF 9998 convert to USD 11,214.26 -- this should
> produce the correct exchange rate.
>
>
>> *Fees in general*
>> I agree with you keeping the fees separate from the transactions they've
>> been generated from.
>>
>> Can you help me with the above questions?
>> Thanks,
>> F.
>>
>> https://www.instagram.com/boniforti_music
>> https://soundcloud.com/boniforti_music
>> https://bonny-j.bandcamp.com
>>
>>
>> Am Di., 5. Nov. 2024 um 01:57 Uhr schrieb R Losey <rlosey at gmail.com>:
>>
>>> Hello.
>>>
>>> I don't think that the "USD Dividends" would be under IBKR - that should
>>> be somewhere else, probably under "Income" somewhere. When you are paid a
>>> dividend, it either goes into the "Cash" fund, or else it is reinvested and
>>> more stock is purchased.  If the dividends are invested, you'd have a
>>> "purchase" of that stock.  For example, if you received $100 in dividends
>>> and it purchased 5 shares of VT stock (using simple numbers to keep it
>>> easy), you have a transaction in IBKR-VT that purchased 5 shares for $100
>>> and the "other" account would be an income account -- for me, it goes in
>>> "Income:Investment Income:Taxable:Dividends".
>>>
>>> Other comments -- see below, but I do want to note (as others have) that
>>> I am not an accountant.
>>>
>>>
>>> On Sun, Nov 3, 2024 at 4:25 AM Boniforti Flavio <boniforti.f at gmail.com>
>>> wrote:
>>>
>>>> Hi Richard.
>>>> I think I was already going that route -->
>>>> [image: image.png]
>>>>
>>>> As of now, I have just put all the CHF Cash in that account.
>>>> As I've added CHF in 5-6 different transactions and in between those I
>>>> have also converted to USD and bought VT stocks, would I need to zero the
>>>> "CHF Cash" account, then add each CHF wire transfer transaction
>>>> individually?
>>>>
>>>
>>> If each wire transaction is separate, there is the chance that the
>>> exchange rate would be different, so I would enter them as different
>>> transactions.
>>>
>>> But unless you take all of the funds from the CHF Cash account, it
>>> doesn't need to be zeroed.  Assuming that there is $1000 in CHF Cash and
>>> $1000 in USD Cash, you could remove any or all of the CHF Cash, and then
>>> add the appropriate USD amount to the USD Cash account.
>>>
>>> Next, you would have a transaction for the purchase of VT stock, with
>>> the funds comes from the USD Cash account.
>>>
>>>
>>>
>>>> And then for each currency conversion I did, create the according
>>>> transaction between "CHF Cash" and "USD Cash" accounts, after which I would
>>>> add the VT purchase transactions - right?
>>>>
>>>
>>> That sounds right to me.
>>>
>>>
>>>
>>>> If I do it like that, I could "hide" the ForEx trading fees by simply
>>>> adjusting the conversion rate (like if I had converted CHF 1'000.- and I
>>>> got USD 1'140.- and paid 1 USD fees, I could just "ignore" the fee and
>>>> adjust the conversion rate so that it gives CHF 1000 --> USD 1140). Would
>>>> that work?
>>>>
>>>
>>> It may "work" but it would probably be more accurate to have a split
>>> transaction with that shows the CHF 1'000 decreasing by 1'000 and then the
>>> USD account going up by 1'141 with a USD 1 decrease assigned to the account
>>> where you track the exchange fees. That way the CHF-to-USD rate would be
>>> correct, and you could see what you are paying for exchange rates.
>>>
>>>
>>>
>>> | Would this process also work when buying VT stocks? In that case, I
>>> buy a fixed amount of VT stocks at the VT price, and I could
>>> | "hide" the fees by adjusting the stock unit price?!
>>>
>>> Again, I suppose you **could** do that, but I usually put the fees in
>>> separately. If I spend $1000 purchasing a stock that is worth $998, the
>>> other $2 is assigned to my account for Investment Fees
>>> ("Expenses:Investment:Fees")
>>>
>>>
>>>
>>>> What's not clear to me at this point is: if I will have 1000 VT stocks,
>>>> where will the actual value be reflected/calculated? Is it depending on
>>>> manual retrieving the VT quotes via Finance::Quote?
>>>>
>>>
>>> Yes, if you are getting quotes via the stock quote your VT value will
>>> reflect the last price update you retrieve. It will NOT change your
>>> transaction.  However, by "hiding" the fee as you propose, it will look
>>> like you've lost money when you have not. See the following example:
>>>
>>> You spend $100 to purchase 10 shares of VT, but there is a fee of $5.
>>> The reality is that you paid $95 for those 10 shares, or $9.50 a share...
>>> however, by "hiding" the fee in the price, it looks as if you paid
>>> $10/share.  The next day, the price goes up to $9.75 -- you have actually
>>> gained $2.50 ($0.25 gain on 10 shares); however, in GnuCash, it will look
>>> like the price has "dropped" from $10 to $9.75 and that you have lost $0.25
>>> per share).
>>>
>>>
>>>
>>>> Thanks,
>>>> F.
>>>>
>>>
>>> I hope this is helpful...
>>>
>>>
>>>
>>>>
>>>> Am Mo., 21. Okt. 2024 um 19:32 Uhr schrieb R Losey <rlosey at gmail.com>:
>>>>
>>>>> Part of this is up to you, and GnuCash is flexible because
>>>>> configurations can change.
>>>>>
>>>>> I assume IBKR is your broker, and you have a single, normal brokerage
>>>>> account that deals in mutual funds and stocks.
>>>>>
>>>>> I would create a brokerage account and note that it is with IBKR; I
>>>>> assume cash is help somewhere like a sweep account. I cannot tell if you
>>>>> have both a USD sweep and a CHF sweep; if you do, I'd create a subaccount
>>>>> for each. Then I'd create an entry in the Security for the VT mutual fund,
>>>>> and create a subaccount in IBKR something like IBKR-VT that tracks the VT
>>>>> shares you own. Each buy or sell of VT will be its own transaction, with
>>>>> the funds coming from the USD sweep.  Money you send to IBKR will, I
>>>>> assume, go into the CHF sweep, and then either manually or automatically,
>>>>> get converted to USD as you make purchases.
>>>>>
>>>>> Dividends are just another transaction; if you are reinvesting
>>>>> dividends, you'll add the transaction, but the "other" account will be some
>>>>> dividend income account - for me, I have an "Income:Investment
>>>>> Income:Taxable:Dividends" account for these things. Dividends that are not
>>>>> reinvested, will be entered in the sweep fund instead of purchasing more of
>>>>> the mutual fund, but would still be assigned to the dividend account.
>>>>>
>>>>>
>>>>>
>>>>> On Sun, Oct 20, 2024 at 7:04 PM Boniforti Flavio <
>>>>> boniforti.f at gmail.com> wrote:
>>>>>
>>>>>> Hi all.
>>>>>>
>>>>>> I'd like to get some suggestions/guidance and eventually validate if
>>>>>> my way
>>>>>> of doing this is correct.
>>>>>>
>>>>>> I've put some money into IBKR (CHF) which I then converted into USD
>>>>>> to buy
>>>>>> VT. For the time being, I've just added the transactions in the "CHF
>>>>>> Cash"
>>>>>> account on IBKR, where I now see the actual money I put there. Now
>>>>>> there's
>>>>>> a few questions I can't answer on my own.
>>>>>>
>>>>>> As of today there is still some cash left on both CHF and USD accounts
>>>>>> (peanuts, just to cover currency conversion fees), and the rest is
>>>>>> invested
>>>>>> in VT, how should I proceed to enter the various transactions, so
>>>>>> that it
>>>>>> finally reflects the actual status (some CHF Cash, come USD Cash and
>>>>>> the
>>>>>> rest in VT)?
>>>>>>
>>>>>> I bought VT like 4 or 5 times, of course at different stock prices.
>>>>>>
>>>>>> Should I create a sub-account called "VT" (type "mutual funds"), then
>>>>>> add
>>>>>> each purchase transaction by taking the money from my "USD Cash"
>>>>>> account,
>>>>>> until the balance corresponds to the actual one on IBKR?
>>>>>> Of course, in advance I would need to add the CHF-to-USD currency
>>>>>> conversion for each time I bought VT shares. Here I don't know if I
>>>>>> should
>>>>>> add a sub-account related to conversion fees or not.
>>>>>>
>>>>>> Last but not least: when I will have set things right (which means
>>>>>> having
>>>>>> the CHF and USD cash accounts showing the actual/real amount and also
>>>>>> the
>>>>>> VT number of shares), will it be enough to update the VT share price
>>>>>> manually to see how much I do have on IBKR?
>>>>>>
>>>>>> And how do I deal with dividends? Should I add another sub-account
>>>>>> for the
>>>>>> dividends? I automatically reinvest dividends in VT - how to deal
>>>>>> with this?
>>>>>>
>>>>>> I know it's a bunch of questions, but maybe some kind soul will be
>>>>>> able to
>>>>>> help me walking through this :-)
>>>>>>
>>>>>> Thanks,
>>>>>> F.
>>>>>>
>>>>>>
>>>>>> https://www.instagram.com/boniforti_music
>>>>>> https://soundcloud.com/boniforti_music
>>>>>> https://bonny-j.bandcamp.com
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>>>>>
>>>>>
>>>>> --
>>>>> _________________________________
>>>>> Richard Losey
>>>>> rlosey at gmail.com
>>>>> Micah 6:8
>>>>>
>>>>
>>>
>>> --
>>> _________________________________
>>> Richard Losey
>>> rlosey at gmail.com
>>> Micah 6:8
>>>
>>
>
> --
> _________________________________
> Richard Losey
> rlosey at gmail.com
> Micah 6:8
>
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