Re: Sell fund / buy fund new portfolio gain goes way down?

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In Reply to: Sell fund / buy fund new portfolio gain goes way down? posted by David Vaughn on September 13, 2005 at 15:20:44:

: If you were to sell a fund in a portfolio and reinvest in a new fund within the same portfolio. Why does the % gain for the portfolio go down as if the portfolio hadn't seen the gains that it already had? Currently, in fund manager I treat the transaction just like it happens.. ie sell one position, buy another from the sold position cash value.

: Thanks!

: Dave

Hi Dave,

The percent gain numbers do not have a time value associated with them. I suspect you are looking at the %Gain-I numbers? The denominator is "purchases", and by selling/buying you are increasing the denominator, and reducing the numerator. See the online help for the equation. This figure can be misleading because it doesn't take into account the time value of money. Instead, it is better to look at yields for performance measurement. Yields do take into account the time value of money, and will not be adversely affected by the situation you describe.

Thanks,
Mark
--
Mark Beiley
Fund Manager, portfolio management software for Windows 95/98/ME/NT/00/XP/2003

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