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Posted by Dr. Marou on February 7, 2007, 11:03 am
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Tom,
I have been dwelling on the proposed solution, and want to take it a further....
I need to
account for the monthly distirbution from Fake Company that flows to my Checking
account in
Quicken. I take it that I would need to sell some portion of Fake Company, and
transfer
that cash to my "Bank" account. I am not able to figure out how to do that using
your
solution of owning but one share of Fake Company.
I am hoping that you (or anyone else) are able to provide a solution for this
matter.
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Original Posting and answer follows......
Folks,
I am new to Quicken 2007, and even newer to this newsgroup that I just found. I
am in need of advice as to how to
handle an investment.
I have an investment (lets call it "oddball" for this posting) whereby I
contribute money, and the money manager
buys shares in hundreds of companies for me, based on the profile I have
established. Unlike a mutual fund, I actually
own all the shares of each of the hundreds of companies in my porfolio, and that
is the way oddball presents it's
monthly statement. Each monthly statement shows the previous months's value of
each company, this months value,
how many shares I own of each. It also shows all sells, and buys and additional
money I contributed, as well as
the monthly distribution I take, dividends, interest and any management expenses.
You can imagine that it would take several hours to enter all of this itemized
data each month so that I can know
what growth or loss I obtained.
I actually do not care to know the details of each of the hundreds of companies
in my portfolio, only how the total
oddball is doing. They do not have site download transactions at this time....
What I want to do, is to enter as little data as possible, so that Quicken can
show me the monthly performance for
the total investment without me having to enter hundreds of monthly transactions.
I attempted to create one single "fake company" and establish a value for it,
that value being the amount of money
I originally contributed to oddball. I set the value to be one dollar for each
share. Example, if I originally sent
oddball 100 dollars, Quicken showed 100 shares of "fake company" each at one
dollar a share.
The problem I run into is in handling all the many monthly transactions, at a
high level. If for example I received
for a given month a total of $10 in dividends, I would show "fake company"
providing $10 dollars of dividends to cash.
Then I would buy 10 dollars of fake company with that cash balance. (I know I
could do reinvest dividends).
If there was a management expense for a given month say of $5, I would sell 5
shares of fake company and put
that procedes in the management expense catagory, and decrease the number of
shares of oddball by five.
I am wondering if any of you would be able to come up a better approach to this
tedious method I came up with.
I do not think my method provides the information I am looking for.
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Posted by TomYoung on February 7, 2007, 1:06 pm
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> Tom,
> I have been dwelling on the proposed solution, and want to take
> it a further.... I need to account for the monthly distirbution from
> Fake Company that flows to my Checking account in Quicken.
> I take it that I would need to sell some portion of Fake Company,
> and transfer that cash to my "Bank" account. I am not able to
> figure out how to do that using your solution of owning but one
> share of Fake Company.
>
At this point I'm not sure if you're still trying to use Quicken as a
tool for measuring the performance of the Oddball account, or as a
pure accounting program for tracking - at a high and summarized level
- the INCOME (e.g., dividends, interets, etc.), EXPENSES (money
manager fees) and TRANSFERS (money to/from your checking account)
associated with Oddball. I'll assume you're in the "accounting" mode
of thought because of the funkyness of Quicken's IRR (performance)
calculation as pointed out by the examples I set up in the last post.
If you try out the examples (BTW, create a separete file called
something like "TEST" to work through the examples so you don't
pollute your real file) you'll see that cash within the Oddball
account can actually go negative, even though this wouldn't happen in
"real life." It doesn't make any difference to you if cash is
negative in Oddball because you're not tracking any individual asset.
That is, you're not tracking all of the hundreds of stocks in the
account, and there's no need to track cash either. What matters to
you are certain cash FLOWS (the ones enumerated above), not cash
BALANCES. Plus, the month-end adjustment of the "quote" for Fake
Company's 1 share brings the TOTAL balance of the account (1 share of
Fake Company +/- cash balance) to the total given to you by the money
manager.
To be clearer:
1) You send money to Oddball.
Accounting entry: reduce cash in Checking, increase cash in Oddball.
This is a TRANSFER event.
2) Money manager buys 137 different stocks.
Accounting entry: nothing.
3) Money manger sells 46 different stocks. Some of the cash is
reinvested, some remains in the account.
Accounting entry: nothing
4) Eighteen of the stocks declare a dividend. Ten of the dividends
are paid in cash and remain in the account as cash and eight of the
dividends are reinvested in the issuing companys' stock.
Accounting entry: Total up the value of all eighteen dividends and
make one entry in the account as straight dividend income. This is an
INCOME event.
5) Three stocks split; two split 2-for-1 and one splits 3-for-1
Accounting entry: nothing
6) One of the stocks (Old Company) in Oddball is acquired by New
Company in a stock-for-stock transaction; you receive .5 shares of New
Company for every share of Old Company.
Accounting entry: nothing
7) Money manager sends you some money from Oddball.
Accounting entry: reduce cash in Oddball and increase cash in
Checking. This is a TRANSFER event.
8) Money manager sells 7 stocks for $15,000, buys 3 stocks for $6,000,
takes out his $4,000 fee and temporarily leaves the remaining $5,000
in the account for a purchase he plans to make in a few days.
Accounting entry: reduce cash in Oddball by $4,000 in a Miscellaneous
Expense transaction, classifying the expense as "Money Manager Fee."
9) At month-end the manager reports a value for Oddball which is
different than the month-end value Quicken reports
Accounting entry: change the quote (up or down) for the one share of
Fake Company so that the Quicken account value (value of Fake Compay
+/- cash in account) agrees to the manager's figure.
In actual practice things just CAN'T be as straight-forward as I've
outlined it above. For example, in the stock-for-stock acquisition
(number 6 above) what if there's a fractional share left over that
get's settled in cash? That IS an income event - at least for tax
purposes - but since you don't know the basis in Old Company you'd be
hard-pressed to figure out what entry to make. In a portfolio of
hundreds of stocks you'll experience all sorts of oddball transactions
- tax-free spin-offs, taxable spin-offs, return of capital
transactions, taxable acquisitions and so forth and so on - that will
defeat your best efforts to make your Quicken accounting perfectly
accurate.
You might be better off pressing the money manager for better monthly
reports and doing your performance calculations in a spreadsheet.
Tom Young
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