Transfer doesn't maintain cost basis?

[jstolzen]

Hi, Mark. I just did a "transfer between" and FM seems to no longer display the right %Gain numbers in the Portfolio Performance report.

This was to record a Rollover from an old 401K to a Rollover IRA, ticker symbol FXAIX (Fidelity S&P 500 Index Fund).

When I look at the Transaction register for FXAIX in the Rollover IRA, it shows the most recent (yesterday) share price ($165.87) for every lot transferred. I assume this is because FM considers those shares "purchased" at the most recent price FM knows, but they were purchased over many years - so shouldn't the share price be the historical purchase price?

This really affected my YTD Portfolio Perfomance report as it took my %Gain for this particular fund way down to 2.2% - and the SPX is up way more than 2.2% YTD. And since I've now "hidden" the old (401K) fund, I'm not seeing this included in my totals. And I wouldn't think it should be, as the fund now has a zero share balance.

Would appreciate any guidance/help on this..

Thx.

[jstolzen]

More..I just ran a YTD Portfolio Performance report with yesterday (prior to the transfer today) as the end date, and %Gain for FXAIX was 26.6%. Same report with today as the end date, and %Gain is 2.2%. This seems wrong to me..

[jstolzen]

I checked a few of the "Transfer In" transactions, and see that there is a Tax Cost Basis with Date Acquired and Value. But the "OOP Cost Value" seems very off to me. For instance, OOP cost value for 64.76 shares acquired 8/17/16 for a cost of $4,984.79 is $64.76.

ETA - did not catch this at first, but it looks like OOP cost value on ALL "transfer from" transactions is essentially the # of shares. For instance, another one: 23.400295 shares in the transferred lot and OOP cost value of 23.40. This looks like a bug (saying this as someone who spent 40+ years in IT before retiring in 2019).

I'm thoroughly confused at this point. If the Tax Cost Basis indicates the lot was acquire prior to the beginning of 2023 (which is the case in this example as it was acquired in 2016), why doesn't FM just use the Price as-of the beginning of the reporting period (in this case, 1/1/23) and the Price of the end of the reporting period to determine %Gain? The fact that I transferred these shares should have nothing to do with %Gain, as I owned the shares prior to the beginning of the reporting period.

[Mark]

Hi jstolzen,

Yes, transfer type transactions can transfer your cost basis. With transfer transactions there is a separate market value and cost basis value/date. If you are looking in the Data Register there are multiple "prices" you may see. If you're under the Data Type of "Prices", these are market prices, and independent from any transaction prices. If you're under the "Data Type" of "All Transactions" or one of the sub-categories here, the "Price" column is showing the transaction price. For a "Transfer In", that is the "Market Price", although there is also a OOP basis and Tax basis number, that you can see if you edit that transaction.

As far as your %Gain numbers, these are based on your "Out Of Pocket" (OOP) cost. In the case of Transfer transactions, FM has an option of either using your Original OOP cost of the transferred shares for this calculation, or it can use the "Market Value" at the time of the transfer for your OOP cost. It depends on how to you want to see things. If you want it to calculate only from the point you transferred, use the Market Value, but if you want to calculate from when you bought them initially, use "Original OOP". This option is located at:

Options / General Preferences... / Other / Transfer Transactions OOP Calculations Use:

You might want to double check that your transfer in transactions have the correct "OOP Cost Value" assigned in the transaction dialog, and you have this setting set to "Original OOP" if that is how you'd like to consider these.

The "Tax Cost Basis" figures in a transfer transaction are used when calculating your capital gains/losses. Only the OOP figure or Market Value (depending on how you set this option) in the transaction dialog are meaningful when it comes to the %Gain calculation.

[jstolzen]

Thanks, Mark. Was not aware of the setting you mentioned to use either OOP or Market Value on Transfers.

Interestingly, though, I'm getting wonky "OOP Cost Value"s on the Transfer In transactions.

It appears that the OOP Cost Value is equal to the # of shares for the Transfer in transaction, rounded to two decimal points precision. It's totally lost my original OOP Cost Value, which I confirmed by going into the "transfer from" account are correct.

For instance,

# of shares: 3.332
OOP Cost value: 3.33

# of shares: 4.16734082
OOP Cost value: 4.17

Every transfer in transaction is like that.

I'm going to delete all the transfer in transactions, the transfer out transaction, set the option to use OOP Cost basis vs Market price and will let you know what happens. But the OOP cost value being equal to # of shares rounded to two decimal points looks like a potential bug as I can't imagine a scenario where that would reflect actuals unless FM was using a share price of $1, which this fund is not..

[jstolzen]

Making progress, but still confusing.

Doing as I wrote above, the OOP Cost Value appears to now be correct (vs # of shares rounded to 2 decimal places). But the YTD Portfolio Performance report is still giving #s I don't understand, with a %Gain for the Rollover IRA (transfer in acct) of 106.4% and a %Gain for the source (Rollover "from") 401K account of -100.0. I've owned most of these shares (aside from quarterly dividends) for the entire year, so I'd think % Gain on the new Rollover IRA fund should be ~return of S&P500, which is ~26%, not 104%.

Interestingly, the Yield field is closer..Transfer "to" (Rollover IRA) is 26.4 and Transfer "from" 26.6. But that's Yield, which I admittedly probably do not fully understand even after reading the Help on Report info multiple times. Guess I always thought Yield as more the rate paid out on a fixed income asset or a ETF or mutual fund that paid dividends.

[Mark]

Hi jstolzen,

Using the "Transfer Between" should not be setting the OOP Value to number of shares, unless the OOP/share was $1/share. It should set the OOP Value to the OOP value of the transferred shares. It sounds like that issue was fixed for you.

Yield here is the rate at which your investment performed, both time and money weighted. This is really the best performance metric, as %Gain can be misleading, as it isn't time weighted. For example, consider the case where you had $1,000,000 invested for 99% of the time, but just before the end of the reporting period you took out most of it. Your basis (denominator in that equation) will be a relatively small number, but your gain could be big, because you had a lot of money working for you most of the time. It will give a really high %gain, which is misleading. On the other hand, ROI Yield takes into account when you bought, when you sold, and for how long different quantities were invested and working for you, so it gives a truer measure of performance.

To understand the %Gain figures being reported you can look at the other numbers in the Portfolio Performance report. What did you start with, what did you take out or add, and what did you end up with. Doing a straight division on this will get you the %Gain. See this documentation for the equation. If you still have questions on the calculation of %Gain, maybe you can post or email me a sample line item from your report.

[jstolzen]

Thanks for the info. Makes sense and I'll look more at ROI and TWR going forward.

Yes - I was surprised to see OOP Value be the # of shares rounded to 2 decimal places when "transfer transactions OOP calculations use" was set to Market Value vs. Original OOP.

I'm guessing that's a bug, as the transfer-from asset was a mutual fund (FXAIX) that would never be anywhere near $1 a share in terms of NAV.

Interesting to note - I did have a previous transfer (in mid 2018) into FXAIX (from FXSIX, which is another S&P500 Index fund) in the 401K portfolio, before transferring (today) FXAIX from the 401K to Rollover IRA portfolio. I first thought maybe that was causing the (potential bug?) with FM, but a quick check of the "Transfer from" (FXSIX) transactions into FXAIX in the 401K all looked to have the proper OOP Cost value. But maybe that's throwing FM off somehow - if it sees shares that were "transfer from" records and then those shares are in turn transferred AGAIN? That seems to be the cause of the issue far as I can tell and maybe something worth checking the code on, as I can't fathom how Cost Value was roughly equal to # of shares (rounded) for so many transactions. Weird.

I wonder if the

[Mark]

Hi jstolzen,

Okay, thanks for the help. I'll keep an eye out for this. It should not be an issue to have a Transfer In, and then do another transfer on these shares. If you run into this problem again, please let me know.