Value Dates versus Transaction Date

[Djobydjoba]

Hi Mark,

Regularly, I receive an executive summary like this from my broker after a reallocation transaction of mutual funds (the portfolio value doesn't change) :

-----------------------------
Transaction Date : 01/07/2011
Value : 4050 €

Detail :
Sold : BGF World Mining ; NAV (01/07/2011) : 100 € ; Shares : 40,5 ; Value 4050 €
Buy : Vanguard US Opportunities ; NAV (01/07/2011) : 50 € ; Shares : 20 ; Value 1000 €
Buy : Templeton Asian Growth ; NAV (01/07/2011) : 25 € ; Shares : 100 ; Value : 2500 €
Buy : BGF World Gold ; NAV (02/07/2011) : 22 € ; Shares : 25 ; Value : 550 €
-----------------------------

So you can notice that NAV dates used in a transaction can be different sometimes, because I guess the NAV for a particular fund isn't available for the day of the transaction and then the broker uses the NAV of the day after.

When this occurs, quite frequently, I record the transaction with the exact NAV dates, to match the downloaded NAV and avoid "flotting" markers in share price graphs (which I don’t like !). But the negative impact concerns the portfolio, which is unbalanced for a day. Here's a snapshot of the Portfolio Cost – Value Graph with this negative effect :



I was thinking that if we could enter two dates in a transaction, a transaction date and a value date, there would be an elegant solution for the all.

Or perhaps there is another trick I'm unaware of ?

Djoby

[Mark]

Hi Djoby,

I didn't quite follow this... Why are you getting spikes like that in the value and cost lines? Why is the portfolio "unbalanced" for a day? Are you recording the cash coming out on a different date than the purchase of the shares?

I'm not sure this answers your question, but the transaction information is independent from your closing price data. When you record a transaction, if there is no closing price recorded on that date, FM will update the closing price with the transaction price. You should record your transactions on the date they occurred, for the amount you paid. When tracking cash, the corresponding cash entry should be recorded for the same date as the transaction.

[Djobydjoba]

Mark,

Thanks for your prompt reply ! I've just modify my first message, which was indeed not complete. The transaction is a reallocation of funds : I sell funds to buy others. The overall value of the portfolio doesn't change.

Is it more clear know ?

Thanks,
Djoby

[Mark]

Hi Djoby,

Yes, that makes it clear, thanks. I would suggest using a default cash account to keep track of the correct portfolio value. When you sell on 1/7, all the money will go into that default cash account. When you buy some on 1/7 and a little more on 1/8 the money will come out of the default cash account as you buy the other shares. The portfolio value and cost will remain constant, and you won't have those spikes in your graph. You're getting those spikes because for the 1 day between the sell and the buy the money appears to have left your portfolio and then come back in 1 day later. By using a default cash account you keep the money in your portfolio, but it is in cash for that 1 day.

[Djobydjoba]

Yes you're right ! A cash account could be the solution. I'm gonna try this.

Thank you.