Re: Deposits to Cash (Money Markets) Misread as Performance Gains

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Posted by Mark on September 04, 2007 at 15:47:59:

In Reply to: Deposits to Cash (Money Markets) Misread as Performance Gains posted by Steve on September 03, 2007 at 20:23:43:

: Mark,

: On my clients' Performance Reports, any deposits in cash (money markets actually) appear to be interpreted as 'gains' on performance reports. I notice this happens regardless of how the cash account is labeled (i.e. Cash, Stock, whatever). I notice that this happens, also, despite checking the boxes labeled 'Exclude Cash Type Investments' and 'Exclude Default Cash Account' in the report settings.

: Any help with this matter would be appreciated.

Hi Steve,

Which report and which %Gain are you looking at? If you are looking at %Gain-V on the Portfolio Performance report, this will happen. None of the %Gain numbers in Fund Manager are time weighted. %Gain numbers can be misleading when money has been transferred in/out during the time period in question. I always like to look at the yields instead, as these are time and value weighted. Many people like simple %Gains though, so Fund Manager offers them.

The %Gain-V is simply equal to:

(End_Value - Beg_Value) / Beg_Value

You can see from this how adding money during the time period would make for a bigger %Gain-V. The %Gain-I attempts to fix this by adding your purchases into the denominator. You can see the equation here:

http://www.fundmanagersoftware.com/help/def_percgaini.html

but even this is not time weighted. If the money was deposited on the last day, it would have the same effect as if it was deposited on the first day of the period in question.

Using the ROI yield field will handle all these cases, no matter when you deposit the money.

The options you mentioned above are on the "Capital Gains" tab of the report preferences dialog. These only affect the capital gain reports, and aren't relevant for the other types of reports.

Thanks,
Mark
--
Fund Manager - Portfolio Management Software

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