I am a serious Quicken user and have been for years. I started using Quicken back in 1997. You read that right – even before the automatic updates from the web were possible! My Quicken file is nearly 100 megs in size. As you can probably imagine, I have a good grasp on my accounting but even after all those years, there is one view of my portfolio I can’t get with all the software out there. I want to view my investment from a capital invested perspective rather than the adjusted cost base. I can show different fields but I have not been able to see the ROI on my capital invested the way I want. The way all software calculate the dividend re-investment is simple since they need to handle all transactions for tax purposes. You pay taxes on your dividends and then later on, after your dividends are re-invested, you pay taxes on capital gains.
When you look at one investment, the calculation on your ROI is simple.
ROI % = (Total Market Value / Adjusted Cost Base) -1
Total Market Value = Share Market Price * Number of Shares
ACB = Initial Investment + Additional Contributions + Reinvested Distributions – Previous Redemptions
However, when you start selling and buying and selling and buying and so forth … the ROI calculation starts to get blurry. The initial investment changes when you buy a new investment. The initial investment is the amount you invested which may well include profits (or loss) from another investments. As you can see, the number of transactions starts to blurry the ROI calculations. As such, I started to track my own performance in a spreadsheet so I get the view on my performance just like I want it.
Not convinced yet? Here is another example. This one should be simple since the rules are the same for everyone. The TFSA was introduced 3 years ago in Canada. As an adult, you are allowed to invest $5,000.00 per year. I invested the maximum allowed for the past 2 years for a total of $10,000.00 (I have not for this year yet). When I look at the performance of my TFSA account under Google Finance, the performance reported is 9.34%. Not quite accurate since it’s worth just over $17,000.00. That’s a $7,000.00 profit or 70% return on investment. Do you see what I mean? I was not allowed to add more money in my TFSA until this year so my capital invested was fixed but the ROI is based on what the software knowns which are the investments.
The Details To Track
It’s all in the details. I basically track the initial number of shares I purchase and then I track the total number of shares I have which gives me the number of shares from my DRIP using simple math. I basically don’t include my DRIP shares in my ACB. My reason is simple, the DRIP is part of my profit and I want to track my profit. It’s comparable with a capital gains only investment where you don’t earn dividends, I compare my invested capitals with the overall profit.
Surprisingly, I can’t track this in Quicken or Google Finance. I also double checked MSN Money and you can’t track it either with them. As a dividend investor, I consider the DRIP shares profits and I want to compare with my initial invested capital. Quicken provides the ability to track income versus stock appreciation and then combines the 2 in an ROI calculation which can be enough for some but not for me. The overall picture is what Quicken is good at but when you want to drill down in the details, it gets much harder. That’s why I track my dividend income (see my previous post on How To Track Dividend Income) and my dividend performance separately. I just need to look at it in a different view.
My next view on my data is the initial amount of capital I invest. Obviously, when you look at individual stocks, it only takes into account the initial purchase and not necessarily the invested capital. As a whole, I track how much capital I invest in each of my accounts. In the table above, you can see 4 different accounts with RRSP, CIBC Mellon, TFSA and Computershare. This is not possible in Quicken since it only tracks the investments in an account and the cost of our initial purchase. As you buy and sell, that value changes for Quicken while in reality, it doesn’t really change how much money you initially invested.
The Value is simply te market value of all the investments in that account where as the Capital Investment manually tracked based on the money I transfer in my investment accounts.
So you have it, I have another spreadsheet to look at my dividend investment returns. I actually track my dividend income and dividend performance in the same spreadsheet but on different sheets. I can reference cells between sheets easily and it simplifies data entry.
Readers: What metrics do you use to evaluate your investment performance?