Money Market losing money

[Ivan]

Hi Mark,

I just noticed that my money market funds show a loss for some, apparently random, sales on the Investment Gain graph. It only seems to happen when the graph is set to Current Cost. There are no fees and all purchases and sales are at $1.00/share, so I don't understand why this is happening.

Thanks,
Ivan

[Mark]

Hi Ivan,

Do you have any negative valued distributions? Try turning on all the markers, and you should easily be able to see when the gain goes negative, and find the associated transaction from the displayed marker(s).

A positive distribution lowers your OOP basis, so a negative distribution would increase it...

You can also check all your recorded closing prices, to make sure you only have prices recorded at 1.

[Ivan]

Hi Mark,

Hope I'm not being dense. I have attached a graph showing a typical drop in gain along with a snapshot of the transactions surrounding it. I don't understand why the sale on 9/14 shows a drop in gain. I'm especially confused since the previous sale on 9/6 had no effect on gain.

Thanks for you patience,
Ivan

[Mark]

Hi Ivan,

Can you post, or email me your investment file (*.dat) for this money market? I will take a look, and try to provide a more specific answer.

[Ivan]

Hi Mark,

I just emailed you the .dat file.

Thanks for the help,
Ivan

[Mark]

Hi Ivan,

When you are in the "Current" cost mode, the gain only on the currently owned shares is plotted. An important point here is that this is the gain from the graph's starting date. Notice, if you change the starting date, the graph still starts near 0 (the gain on the first plotted day is included, so it may not be exactly 0). If you plot your gain for the full history, you will see it does not go negative. The gain goes up when you record an interest distribution because the OOP cost of all the shares owned at the time of the distribution goes down. You can see this happening if you look at the "Historical" mode. The historical gain keeps going up when you receive interest. In the current cost mode, when you sell these lower cost shares, you are left with higher cost shares, thus your gain on the currently owned shares is smaller than before the sell transaction. If your starting date is not at investment inception, this means it can go negative, but this is only negative relative to it being 0 on the graph's start date.

[Ivan]

Got it! Thanks for the clear explanation.

Ivan