Help! I need to find poorest performing mutual funds.
Gary
resulting income tax bill by selling some of my non-IRA investments. I
have quite a bit of history in a number of mutual funds and need to
figure out which ones have performed the worst for me; those are the
ones I'll sell.
This is not normally something I do, so I'm not familiar with the best
tools. Can anyone suggest which of Quicken's reports might be the
right ones to run to evaluate better or poorer performers among my
investments? I use Quicken Deluxe 2009.
Thanks for your suggestions.
TomYoung
Run Investment > Investment Performance reports for each of your
funds, one at a time, over various periods of time. The Investment
Performance report calculates an Internal Rate of Return; if you find
that one fund is fairly consistently coming up with the lowest IRR
over the selected periods compared to your other funds, that's your
poor performer.
Tom Young
Gary
Thanks, Tom. Seems like a good suggestion and I'm going to work with
it starting this morning.
But there are things in Quicken that confuse me ... they seem
contradictory. Since you obviously have experience working with them,
perhaps you might know what I'm dealing with, and therefore, what
decisions I might make.
Here's an example where two methods give seemingly incompatible
results. It's my investments in Franklin Templeton's Mutual Qualified
(now Mututal Quest) find.
Looking at the IRR to suggested, this seems like a positive winner; I get
Investment Performance - ETD
4/11/1983 through 1/3/2010
Date Account Action Description
Investments Returns Avg.†Ann
4/11/1983 - 1/3/2010
4/11/1983 Beg Mkt Val 0.00
7/22/1996 Frnkl Te... BoughtX 33.113 Mut Qualified 1,000.00
5/29/1997 Frnkl Te... BoughtX 168.729 Mut Qualified 3,000.00
7/9/1997 Frnkl Te... Bought 162.338 Mut Qualified 3,000.00
8/1/1997 Frnkl Te... Bought 157.398 Mut Qualified 3,000.00
1/3/2010 End Mkt Val
27,512.63
TOTAL 4/11/1983 - 1/3/2010
10,000.00 27,512.63 8.36%
Looking at the Overview section of the account it seems like a real
loser; I get
Quote/Price Shares Market Value Cost
Basis Gain/Loss Gain/Loss %
Mut Qualified 17.24 1595.86 27,512.63 28,581.21
-1,068.58 -3.74
It seems as if the IRR calculation (8.36%) doesn't take into account
reinvested dividends as part of the cost. Probably I haven't set
something properly ... I can't believe Quicken wouldn't consider them.
TomYoung
This is kind of confusing, but both ways of looking at this investment
*are* correct.
On the one hand, think about this investment like a CD that you can
add to from time to time and where interest is credited to your
account. The CD matures on 1/3/2010. You opened the account back on
7/22/99 with $1,000, then added to the account at $3,000 a pop on
5/29/97, 7/9/97 and 8/1/97. From the date of your last deposit until
1/3/2010 you were on an extended trip to the far side of the moon so
you never saw a statement from the bank and never even though about
the account until you returned from your trip. On 1/3/2010 you walk
into the bank and say "gimme all my money" and they hand you
$27,512.63. The math says you got an annual return of 8.362% for the
time that account was opened. Period. End of Story.
Now, take that exact same account but we'll say that the account when
you opened it promised you 8.69% until maturity on 1/3/2011. Every
month the bank emailed you a statement on the 3rd of the month showing
interest credited and the account's balance. You immediately entered
this information in Quicken and watched your money grow. On 1/3/2010
you got the bank's statement, as usual, and entered that month's
interest. How much money does Quicken show in the account? Why, it's
$28,581.21! However, on that same day an emergency comes up and you
need some big money RIGHT NOW! You go running down to the bank and
say "gimme all my money," to which the teller says "there's a penalty
for early withdrawal in the amount of $1,068.58" and hands you a check
for $27,512.63. You go home and zero out the account, 1st crediting
the account for $27,512.63 (that's the amount you deposited in your
checking account) and then crediting the account for $1,068.58 to a
category called "Penalty for early withdrawal" which could also be
considered a "loss on sale."
So, yes, if you sold your fund today you'd "lose" $1,068.58 and you'd
have received a return on this investment of 8.362%.
Tom Young
TomYoung
And, to add to what I wrote above, let's say you made the exact same
investments on the exact same dates in another fund, a different fund
than the Franklin Templeton's Mutual Qualified. Just by luck, on the
dates when this other fund declared and reinvested dividends the share
price was in the toilet and, after accounting for the initial
purchases and reinvested dividends your cost basis in the fund was
$22,913 vs. a market value of $25,111 for a gain of $2,198! YES!
However the IRR on this fund is only 7.58%.
Which fund would you rather have owned?
Tom Young
Gary
Excellent examples, but now it's getting very complex. Something like
the old joke about draining the swamp!
Remember my original objective was to determine which fund or funds to
cash in to pay for my IRA to Roth conversions? The question remains,
which of the two approaches (Gain/Loss or IRR) will give me better
guidance for fund selection? The two approaches point to different
funds.
TomYoung
> On 2010-01-03 13:21:35 -0500, TomYoung <sombo...@gmail.com> said:
>
>
>
> > On Jan 3, 10:05Â am, TomYoung <sombo...@gmail.com> wrote:
> >> On Jan 3, 6:01Â am, Gary <gary...@hotmail.com> wrote:
>
> >>> On 2010-01-01 17:35:12 -0500, TomYoung <sombo...@gmail.com> said:
>
> >>>>> I've converted a lot of money from IRA to Roth and need to pay for t
> > he
> >>>>> resulting income tax bill by selling some of my non-IRA investments.
> >>>>> have quite a bit of history in a number of mutual funds and need to
> >>>>> figure out which ones have performed the worst for me; those are the
> >>>>> ones I'll sell.
>
> >>>>> This is not normally something I do, so I'm not familiar with the be
> > st
> > the
> >>>>> right ones to run to evaluate better or poorer performers among my
>
> >>>>> Thanks for your suggestions.
>
> >>>> Run Investment > Investment Performance reports for each of your
> > ent
> >>>> Performance report calculates an Internal Rate of Return; if you find
> >>>> that one fund is fairly consistently coming up with the lowest IRR
> >>>> over the selected periods compared to your other funds, that's your
> >>>> poor performer.
>
> >>>> Tom Young
>
> > ith
> >>> it starting this morning.
>
> >>> But there are things in Quicken that confuse me ... they seem
> > hem,
> >>> perhaps you might know what I'm dealing with, and therefore, what
> >>> decisions I might make.
>
> >>> Here's an example where two methods give seemingly incompatible
> > fied
> >>> (now Mututal Quest) find.
>
> >>> Looking at the IRR to suggested, this seems like a positive winner; I g
> > et
>
> > Â Â Investment Performance - ETD
>
> >>> Â Â Â Â Â Â Â Â Â Â
> > Â Â 4/11/1983 through 1/3/2010
>
> >>>   Date     Account   Actio
> > n     Description     Â
> > Â Â Â Â Â
> >>> Investments  Returns  Avg.†Ann
>
> >>> 4/11/1983 - 1/3/2010
>
> >>> 4/11/1983 Â Â Â Â Â Â Â Â Â
> >  Beg Mkt Val        Â
> > Â 0.00
>
> >>> 7/22/1996 Â Frnkl Te... Â BoughtX Â Â Â 33.113
> >  Mut Qualified     1,000.00
>
> >>> 5/29/1997 Â Frnkl Te... Â BoughtX Â Â 168.729 Â M
> > ut Qualified     3,000.00
>
> >>> 7/9/1997   Frnkl Te...  Bought    162.
> > 338  Mut Qualified     3,000.00
>
> >>> 8/1/1997   Frnkl Te...  Bought   157.398
> >  Mut Qualified     3,000.00
>
> >>> 1/3/2010 Â Â Â Â Â Â Â Â Â
> >   End Mkt Val       Â
> > Â Â Â Â Â Â Â Â
> >>> Â Â Â Â Â Â Â Â Â Â
> > Â Â Â Â Â 27,512.63
>
> >>> TOTAL 4/11/1983 - 1/3/2010 Â Â Â Â Â Â
> > Â Â Â Â Â Â Â Â Â Â Â
> > Â Â Â Â Â Â
> >>> Â Â Â 10,000.00 Â 27,512.63 Â 8.36%
>
> >>> Looking at the Overview section of the account it seems like a real
> >>> loser; I get
>
> > uote/Price   Shares   Market Value   Co
> > st
> >>> Basis   Gain/Loss   Gain/Loss %
>
> >>> Mut Qualified   17.24     1595.86
> > Â Â 27,512.63 Â Â Â 28,581.21 Â Â Â
> >>> Â -1,068.58 Â Â Â -3.74
>
> >>> It seems as if the IRR calculation (8.36%) doesn't take into account
> >>> something properly ... I can't believe Quicken wouldn't consider them.
>
> >> This is kind of confusing, but both ways of looking at this investment
> >> *are* correct.
>
> >> On the one hand, think about this investment like a CD that you can
> >> add to from time to time and where interest is credited to your
> > ack on
> >> 7/22/99 with $1,000, then added to the account at $3,000 a pop on
> >> 5/29/97, 7/9/97 and 8/1/97. From the date of your last deposit until
> >> 1/3/2010 you were on an extended trip to the far side of the moon so
> >> you never saw a statement from the bank and never even though about
> >> into the bank and say "gimme all my money" and they hand you
> > e
> >> time that account was opened. Â Period. Â End of Story.
>
> >> Now, take that exact same account but we'll say that the account when
> >> month the bank emailed you a statement on the 3rd of the month showing
> > d
> >> this information in Quicken and watched your money grow. Â On 1/3/201
> > 0
> >> you got the bank's statement, as usual, and entered that month's
> > y, it's
> >> $28,581.21! Â However, on that same day an emergency comes up and you
> >> need some big money RIGHT NOW! Â You go running down to the bank and
> >> say "gimme all my money," to which the teller says "there's a penalty
> >> for early withdrawal in the amount of $1,068.58" and hands you a check
> >> the account for $27,512.63 (that's the amount you deposited in your
> >> checking account) and then crediting the account for $1,068.58 to a
> >> considered a "loss on sale."
>
> >> So, yes, if you sold your fund today you'd "lose" $1,068.58 and you'd
>
> >> Tom Young
>
> > And, to add to what I wrote above, let's say you made the exact same
> > investments on the exact same dates in another fund, a different fund
> > than the Franklin Templeton's Mutual Qualified. Just by luck, on the
> > dates when this other fund declared and reinvested dividends the share
> > price was in the toilet and, after accounting for the initial
> > purchases and reinvested dividends your cost basis in the fund was
> > $22,913 vs. a market value of $25,111 for a gain of $2,198! YES!
> > However the IRR on this fund is only 7.58%.
>
> > Which fund would you rather have owned?
>
> > Tom Young
>
> Excellent examples, but now it's getting very complex. Something like
> the old joke about draining the swamp!
>
> Remember my original objective was to determine which fund or funds to
> cash in to pay for my IRA to Roth conversions? The question remains,
> which of the two approaches (Gain/Loss or IRR) will give me better
> guidance for fund selection? The two approaches point to different
> funds.
Since Quicken can only provide historical information and you want to
use Quicken for guidance it appears you are thinking along the line of
"poor performance in the past suggests poor performance in the
future." Probably most investors employ this logic to some extent,
because it's so darn hard to look into the future. Particularly with
mutual funds with hundreds and hundreds of individual holdings.
As you can see, you can have a fund that has a larger gain (or smaller
loss) than another fund yet have a worse IRR. Answer the question I
posed above: you invest identical sums in two funds at identical times
and one fund has a larger accounting "gain" than the other, yet puts
less money in your pocket. Which fund performed the best over that
time? Since everything else is equal I think most anybody would say
"I'll take more money, please." You can even get slightly more
sophisticated and also look at the funds' volitility over time and
blend that factor into your decision.
That's exactly why I suggested running IRR's over various times (and
the ending period doesn't always have to be "today"; you could run an
IRR for each and every calendar year you've owned a fund, each 3-year
period you've owned a fund beginning an ending at mid-year, etc.,
etc. ) and taking a look at those numbers. If one fund is
consistently at the bottom of the list I'd say that's your poor
performer because you always ended up poor, for each dollar invested,
than all your other funds.
Tom Young
Gary
Thanks a lot for your comments. Consensus among those close to me is
to sell the fund with the maximum loss and take advantage in my taxes
(especially the year I convert IRA to Roth and am in a higher marginal
bracket).