Calculating ROI when there are multiple sequential purchases

[Mary Kennedy]

I a having some difficulty interpreting ROI when I have repeated purchases of a stock. Here are two examples.

1. Recently I purchased additional shares of a company that I had already owned for some time. FM correctly lists this most recent purchase in its list of transactions, along with the original purchases and intervening dividends. However, I noticed that, in its reports, FM lists the recent purchase date as THE purchase date, ignoring the fact that I have owned the bulk of the shares for a long time.

I am wondering whether it is using the original purchase date or the recent purchase date as the basis for its ROI calculations. Is it now calculating ROI for only the additional purchase and not for the entire holding?

A similar problem occurred in another company which recently distributed a cash dividend along with a share of stock. FM correctly identified the new share as a re-invested dividend, but now, in its reports, it lists this most recent date as the purchase date for the entire holding.

I have two problems with these reports. One is that when I look at ROIs, I tend to also look at dates of purchase, so it is distracting to have a recent date for something I know I have owned for some time.

But the second problem is that I am wondering how FM is actually calculating ROI. Ideally, I would think that FM should actually calculate multiple ROIs, one for the original shares and another for the recent additions, and then combining those into an overall return estimate. That seems like what should happen, but I'm being distracted by the fact that it is listing these recent dates as the dates of purchase for the entire holding

If that is NOT what FM is doing, is there a way to manually revise these entries so that FM will calculate ROI based on the original purchase date rather these more recent dates, and also calculate ROI based on the original prices rather than the prices of these new purchases in its calculation of ROI?

[Mark]

Hi Mary Kennedy,

I noticed that, in its reports, FM lists the recent purchase date as THE purchase date

...

in its reports, it lists this most recent date as the purchase date for the entire holding

Which report and which field are you looking at? There isn't just a single purchase date when you've purchased it multiple times.

When you have purchased shares on multiple dates, FM factors this into the ROI. The ROI is time and money weighted, so when you have more money invested, the performance is more heavily weighted. You can see the equation/examples here:

https://www.fundmanagersoftware.com/hel ... s_roi.html

If you look at that equation, you'll see there is an additional term for each purchase within the yield term. It does not use the same date for all purchases. It uses the purchase date for each separate purchase. If you can clarify where you're seeing this purchase date that is causing confusion, I can try to help better.

[Mary Kennedy]

This is great. Thanks a lot.

I figured the ROI was being calculated that way but I began worrying when I saw the purchase date as being two weeks ago. I had no idea there were multiple date options in your list of variables and now that I switch to another one, I'm getting a report that looks right to me. Thanks again.