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-
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- Part III: A Potpourri of Investment Information
-
- Chapter 20 - Analysis
-
-
- Capital Gainz provides all the numbers you need for analysis, and
- even presents them in graphical form with the Capital Gainz Graphics
- Program. The variety of calculations, reports, and graphs available
- will help you keep on top of your portfolio's performance. The goal of
- this chapter is to point out what Capital Gainz offers for analysis.
- For specific information and advice, you should consult other sources,
- such as the business section of your local newspaper, investment
- books, investment newsletters, and financial advisors.
-
- 20.1 Discrepancies
-
-
- 20.1.1 Open Shares Rounding
-
- ===>>> The Open Shares Log and Open Shares Detail Report calculate
- each purchase's gain or loss. However, the total gain or loss is
- calculated by multiplying the total number of open shares by the
- current price, and subtracting the total basis amount. Because of
- rounding, this total may not be the same as summing the gain or loss
- of all the individual records.
-
- 20.1.2 Average Selling Method
-
- ===>>> You are likely to see rounding whenever you use the averaging
- selling method. When you sell the shares, the average price is used as
- the basis price. However, when this price is multiplied by the number
- of shares, the resulting amount is rounded to the nearest cent. Thus,
- the purchase amount subtracted for the shares sold may alter the basis
- price of the remaining shares. Likewise, the open basis price for the
- shares sold may differ from the basis price displayed before the sale.
- However, any difference is insignificant, and the underlying purchase
- amounts are kept consistent.
-
- 20.1.3 Local Security Precisions
-
- In the Local Security Form, you can specify share number and price
- precisions for a local security. Check the statements from your broker
- or mutual fund company and see what precisions they use, so your
- totals and their totals will match. These precision entries are
- especially helpful when you record purchases, sales, and
- distributions, because the figures calculated by Capital Gainz will
- match the actual figures without modification if you defined them
- correctly.
-
-
-
-
-
- Capital Gainz Users Manual 20-1
-
-
-
-
- 20.1.4 Mutual Fund Total Return
-
- It's difficult to get an exact match between the total return
- calculated by Capital Gainz and the total return calculated by your
- mutual fund company. The beginning and ending dates and prices must
- match, as do all distribution amounts and reinvestment prices.
- Usually, these figures are available from fund literature mailed to
- you. Even then, the mutual fund company may use greater precision in
- their calculations. In any case, the total return figure reported by
- Capital Gainz should be very close to the figure reported by the
- mutual fund company.
-
- 20.2 Open Shares Gain/Loss
-
- The first step in analysis should be checking the gain/loss on
- your open shares. You can see these figures in the Local Security
- Table, the Portfolio Table, the Portfolio Summary Report, the
- Portfolio Detail Report, the Activity Summary Report, and the Open
- Shares Detail Report.
-
- gain/loss = (open_shares_value - open_shares_basis -
- open_shares_comm)
-
- open_shares_value = (open_shares * current_price)
-
- open_shares_basis (average) = open_shares * average_price
- open_shares_basis (cost) = open_shares_amount
-
- The price for the average method is derived from the open totals
- maintained in the local security record:
-
- local_sec_open_amt
- average_price = ─────────────────────
- local_sec_open_shares
-
- 20.2.1 Example - Open Shares Gain/Loss
-
- For example, say you made the following purchases:
-
- 100 shares at $10 each, for $1000, with a $30 commission
- 100 shares at $9 each, for $900, with a $30 commission
-
- The current price is now $11.00. Your current, unrealized gain would
- be:
-
- gain = ((200 * $11) - ($1000 + $900) - ($30 + $30)) = $240
-
- If the current price was $9.50, your current, unrealized loss would
- be:
-
- loss = ((200 * $9.5) - ($1000 + $900) - ($30 + $30)) = -$60
-
-
- 20-2 Capital Gainz Users Manual
-
-
-
-
- 20.2.2 Security Cost/Value Graph
-
- The Security Cost/Value Graph, described in Chapter 19, displays
- cost and value bars for each local security in the specified
- portfolio. The cost corresponds to the open_shares_basis above, and
- the value corresponds to the open_shares_value above. This chart lets
- you easily determine which securities are doing well and which are
- doing poorly.
-
- 20.2.3 Open Shares Gain/Loss Percentage
-
- The gain/loss percentage for open shares, assuming you don't
- include commissions in the basis, is calculated with:
-
- open_shares_gain_loss
- ─────────────────────────── * 100
- open_shares_basis
-
- If you include commissions in the basis:
-
- open_shares_gain_loss
- ──────────────────────────────────── * 100
- open_shares_basis + open_shares_comm
-
-
- 20.2.4 Example - Open Shares Gain/Loss Percentage
-
- Using the previous examples, these are the gain/loss percentages:
-
- $240/$1900 = 12.63% gain
- -$60/$1900 = -3.16% loss
-
- If commissions were included in the basis:
-
- $240/$1960 = 12.24% gain
- -$60/$1960 = -3.06% loss
-
- 20.2.5 Broker/Investment Company Performance
-
- You can choose to subtotal the Portfolio Detail Report by
- broker/investment company. This feature is useful for comparing
- performance if you rely on a broker or investment advisor for advice.
- These comparisons will indicate both the best stock and the best
- investment type recommendations.
-
- Also, you can use the subtotals to compare the performance of
- different mutual fund groups, or investment companies. However, to
- have a fair comparison, you should hold similar security types in each
- mutual fund group.
-
-
-
-
- Capital Gainz Users Manual 20-3
-
-
-
-
- 20.3 Closed Shares Gain/Loss
-
- Closed share performance is available from the Activity Summary
- Report, the Closed Shares Detail Report, and the Open Information for
- Shares Sold Report. This figure will tell you if you've been slow to
- cut your losses, or quick to realize your gains.
-
- closed_shares_amount = (number_of_shares_sold * selling_price)
- open_shares_basis (average) = open_shares * average_price
- open_shares_basis (cost) = open_shares_amount
-
- gain/loss = (closed_shares_amount - open_shares_basis -
- closed_shares_comm - open_shares_comm)
-
- For the Schedule D-1 Report, the gain/loss calculation results in
- the same values as above. However, intermediate values printed in the
- report deserve some explanation here:
-
- sales price = closed_shares_amount
- cost = open_shares_basis + open_shares_comm + closed_shares_comm
-
- gain/loss = sales_price - cost
-
- The result is identical to the previous calculation:
-
- gain_loss = sales_price - cost
- = closed_shares_amount - (open_shares_basis +
- open_shares_comm + closed_shares_comm)
- = closed_shares_amount - open_shares_basis -
- closed_shares_comm - open_shares_comm
-
- 20.3.1 Example - Closed Shares Gain/Loss
-
- For example, say you executed the following sale:
-
- Sell 200 shares at $11.00 with a $45 commission.
- The shares were purchased in two 100 share lots:
- 100 shares at $10 each, for $1000, with a $30 commission
- 100 shares at $9 each, for $900, with a $30 commission
-
- The realized gain on the sale would be:
-
- gain = ((200 * $11) - ($1000 + $900) - ($45) - ($30 + $30)) = $195
-
- If you executed the sale at $9.50 instead, the realized loss would be:
-
- loss = ((200 * $9.5) - ($1000 + $900) - ($45) - ($30 + $30)) = -
- $105
-
- On Schedule D-1, the sales price is:
-
-
-
- 20-4 Capital Gainz Users Manual
-
-
-
-
- sales price = (200 * $11) = $2200
- or sales price = (200 * $9.5) = $1900
-
- and the cost is:
-
- cost = ($1000 + $900) - ($45) - ($30 + $30) = $2005
-
- 20.3.2 Closed Shares Gain/Loss Percentage
-
- The gain/loss percentage for closed shares, assuming you don't
- include commissions in the basis, is calculated with:
-
- closed_shares_gain_loss
- ───────────────────────────── * 100
- open_shares_basis
-
- If you include commissions in the basis:
-
- closed_shares_gain_loss
- ───────────────────────────────────────────────────────── * 100
- open_shares_basis + open_shares_comm + closed_shares_comm
-
-
- 20.3.3 Example - Closed Shares Gain/Loss Percentage
-
- Using the previous example, these are the gain/loss percentages
- not including commissions:
-
- $195/$1900 = 10.26% gain
- -$105/$1900 = -5.53% loss
-
- If commissions were included in the basis:
-
- $195/$2005 = 9.73% gain
- -$105/$2005 = -5.24% loss
-
- 20.3.4 Closed Shares Gain/Loss - Over Period
-
- On the bottom part the Activity Summary Report, the closed shares
- gain/loss is calculated over the specified period. The difference
- between this value and the normal closed shares gain/loss is that
- purchases made before the specified beginning date use the following
- basis:
-
- open_shares_basis = open_shares * begin_price
-
- This results in a gain/loss figure completely attributable to the
- specified period.
-
-
-
-
-
- Capital Gainz Users Manual 20-5
-
-
-
-
- 20.4 Average Price
-
- The average price calculation for the shares purchased is:
-
- open_shares_basis
- average price = ─────────────────────
- number_of_open_shares
-
- This is a weighted average, telling you the average price that you
- paid for shares of the security.
-
- The average price calculation for the shares sold is:
-
- sold_shares_amount
- average price = ─────────────────────
- number_of_sold_shares
-
- Again, this is a weighted average, telling you the average price that
- you realized on shares of the security.
-
- 20.4.1 Monthly Average Price
-
- In the Price History Table and Report, the monthly average price
- is calculated by first averaging the prices in each month, then
- averaging each month's average price. This accounts for a varying
- number of entries in a month.
-
- sum(prices_in_month)
- month average = ────────────────────
- number_of_prices
-
- sum(month_average)
- monthly average price = ──────────────────
- number_of_months
-
- 20.4.2 Average Price - Example
-
- Say you've recorded the following purchases:
-
- 1/ 1/91 Buy 100 shares at $9, for $900
- 1/15/91 Record price of $7
- 2/ 1/91 Buy 200 shares at $8, for $1600
- 2/15/91 Record price of $10
- 2/20/91 Record price of $12
- 3/ 1/91 Buy 100 shares at $10, for $1000
-
-
-
-
-
-
-
-
- 20-6 Capital Gainz Users Manual
-
-
-
-
- average purchase price = ($900 + $1600 + $1000)/(100 + 200 + 100)
- = $8.75
-
- 1/91 average: ($9 + $7)/2 = $8
- 2/91 average: ($8 + $10 + $12)/3 = $10
- 3/91 average: ($10)/1 = $10
-
- monthly average price = ($8 + $10 + $10)/3 = $9.33
-
- 20.5 Current Yield
-
- Current yield refers to the simple annual percentage you can
- expect from a given security. Some securities don't pay out dividends
- or interest, and thus have a current yield of 0%. Only
- dividends/interest are used, even though most mutual funds also
- regularly make capital gains distributions. Capital gains
- distributions are erratic, rendering any calculations based on them
- meaningless.
-
- The current yearly dividend/interest payout for a security is
- calculated as the number of payouts per year multiplied by the the
- last per share payout.
-
- (dividends_per_year * last_dividend_per_share)
- yield = ────────────────────────────────────────────── * 100
- last_price_per_share
-
- Current yield is usually more important for bonds or large company
- mutual funds and stocks, where price appreciation is a secondary
- consideration. For growth or small company mutual funds and stocks,
- other performance figures, such as total return, are more important
- than current yield.
-
- Note that current yield is really a measure of expected return.
- That's why Capital Gainz takes the last dividend/interest distribution
- per share and multiplies it by the number of expected
- dividend/interest payouts. An alternative is to sum all
- dividend/interest distributions over the last year.
-
- 20.5.1 Example - Current Yield
-
- Say you own 100 shares of a security that distributes dividends
- quarterly. A $76.00 dividend payment translates into $0.76 per share.
- Multiply by four, since the dividend is quarterly, and you have a
- $3.04 per share annual dividend. If the shares are trading at $45.00
- each, then the current yield is 6.76%.
-
- (4 * .76) 3.04
- ─────────── * 100 = ───── * 100 = 6.76%
- 45.00 45.00
-
-
-
- Capital Gainz Users Manual 20-7
-
-
-
-
- 20.5.2 Distribution Per Share
-
- The distribution per share figure is the dividend rate for stocks.
- Most mutual fund statements include a per share value on the statement
- declaring the amount of the distribution. If the mutual fund company
- does not include the per share figure, you can let Capital Gainz
- calculate it in the Distribution Form. The calculated value should be
- very close to the actual value. There are two slightly different ways
- to calculate this figure, depending on the type of security. For most
- stocks and stock mutual funds, use the following:
-
- distr_amount
- distr_per_share = ─────────────
- shares_owned
-
- However, many cash securities and income or bond mutual funds factor
- in shares held for partial distribution periods:
-
- shares_entire: Shares held for the entire distribution period
- = number of shares
-
- shares_partial: Shares held for part of the distribution period
-
- (distr_date - purchase_date)
- = shares * ────────────────────────────
- 365/div_per_year
-
- distr_amount
- distr_per_share = ───────────────────────────────
- shares_entire + shares_partial
-
- Capital Gainz currently assumes any security paying dividends
- monthly (dividends per year = 12) uses partial dividend periods. Other
- securities are assumed not to. The difference is not very significant,
- and only applies to the default per share value calculated in the
- Distribution Form.
-
- 20.5.3 Example - Distribution Per Share
-
- Assume the following activity for a mutual fund that pays
- quarterly dividends:
-
- 1/01/92 Own 100 shares
- 1/15/91 Buy 10.00 shares
- 1/31/91 Dividend of $45.87
-
- The dividend per share is calculated with:
-
- distr_amount 45.87
- distr_per_share = ───────────── = ────── = 0.417
- shares_owned 110.00
-
-
- 20-8 Capital Gainz Users Manual
-
-
-
-
- However, for a money market mutual fund that pays monthly dividends,
- the dividend per share is calculated with:
-
- shares_entire = 100.00
-
- (1/31/91 - 1/15/91)
- shares partial = 10.00 * ──────────────────── = 5.33
- 365/12
-
- 45.87
- distr_per_share = ────────────── = 0.435
- 100.00 + 5.33
-
- 20.6 Total Return
-
- ===>>> The total return calculation, shown on the Activity Summary
- Report, shows how a particular security fared over a specified period.
- This figure represents a buy-and-hold strategy, which may or may not
- be equivalent to the performance that you realize. Total return is
- calculated by scanning the Price History File for prices and
- distributions per share. Distributions are assumed to be reinvested.
- The actual calculation is:
-
- begin_shares = 1.00
- end_shares = 1.00 + shares_bought
- shares_bought = sum(distr_per_share/reinvestment_price)
- begin_value = begin_shares * begin_price
- end_value = end_shares * end_price
-
- (end_value - begin_value)
- total return = ───────────────────────── * 100
- begin_value
-
- When comparing the performance of securities, it's important to
- compare 'like' periods. For instance, comparing the return of Mutual
- Fund A from 1988-1991 to Mutual Fund B from 1985-1988 unfairly
- penalizes Mutual Fund B, since there was a severe market correction in
- 1987. If these are the only periods data is available for these two
- funds, no reliable comparison can be made.
-
- 20.6.1 Total Return Rate
-
- To compare the total return figure to a fixed, compounded
- investment, an annual rate is also calculated. This rate assumes
- simple, yearly compounding of interest, and is calculated by:
-
-
-
-
-
-
-
-
- Capital Gainz Users Manual 20-9
-
-
-
-
- begin_date = date of first price found within date range
- end_date = date of last price found within date range
-
- (end_date - begin_date)
- years = ───────────────────────
- 365
-
- end_value 1
- rate = ( ─────────── ^ ───── - 1 ) * 100
- begin_value years
-
- 20.6.2 Example - Total Return
-
- For example, say Carolina Power and Light (CPL) had this data for
- 1/ 1/90 through 12/31/91 (in a dividend reinvestment plan):
-
- begin_shares = 1.00
- end_shares = 1.00 + shares_bought
- begin_price = 47.228 on 1/ 3/90
- end_price = 52.625 on 12/27/91
- shares_bought = .1387
- ( 2/ 2/90: ((1.0000 + .0000) * .73)/43.637 = .0167
- 5/ 2/90: ((1.0000 + .0167) * .73)/43.695 = .0170
- 8/ 6/90: ((1.0167 + .0170) * .73)/43.651 = .0173
- 11/ 5/90: ((1.0337 + .0173) * .73)/43.318 = .0177
- 2/ 1/91: ((1.0510 + .0177) * .76)/45.292 = .0179
- 5/ 2/91: ((1.0687 + .0179) * .76)/48.058 = .0172
- 8/ 1/91: ((1.0866 + .0172) * .76)/47.420 = .0177
- 11/ 1/91: ((1.1038 + .0177) * .76)/49.625 = .0172
- Total: .1387)
- begin_value = 1.00 * .47.228 = 47.228
- end_value = (1.00 + .1387) * 52.625 = 59.924
-
- years = 2
-
- (59.924 - 47.228)
- total return = ───────────────── * 100 = 26.88%
- 47.228
-
- 59.924 1
- rate = ( ───────── ^ ─── - 1 ) * 100 = 12.64%
- 47.228 2
-
- So to beat the performance of CPL over the two years, you would have
- needed a fixed income investment yielding better than 12.64%.
-
- 20.6.3 Total Return Graph
-
- The Total Return Graph in the Capital Gainz Graphics Program
- visually illustrates total return. This area graph shows the total
- return of a security over time, with the price and distribution
- components broken down into separate areas. For a description of this
-
- 20-10 Capital Gainz Users Manual
-
-
-
-
- graph, refer to Chapter 19.
-
- 20.7 Performance
-
- ===>>> The Activity Summary Report processes all of your activity in a
- security to come up with a figure showing your performance. If you had
- purchased shares at the beginning of the period, and then just held
- them to the end of the period, then this calculation will be the same
- as the total return figure for the security. However, if you purchased
- more shares over the period, or sold shares over the period, then your
- actual performance will be better or worse than the total return of
- the security over the period.
-
- This performance calculation is complex. The goal is to measure
- in-flow and out-flow of dollars to arrive at how much money you would
- have made, or lost, if you liquidated the account. Unlike all other
- calculations in Capital Gainz, this figure adds back open shares
- amounts that you sold later. It's like taking a snapshot of your
- portfolio at the beginning and ending of the period: if you sold
- shares after the specified end date, they are still considered to be
- open at the specified end date.
-
- There are five components to your performance:
-
- o Your initial holdings as of the specified begin date. This includes
- shares purchased before the begin date and not sold as of the begin
- date.
-
- o Your buy activity over the period. This includes all purchases
- between the begin and end dates, regardless of whether or not you
- sold the shares later.
-
- o The distributions you received, and fees you paid, over the period.
-
- o Your selling activity over the period.
-
- o Your holdings as of the specified end date. This includes shares
- purchased before the end date and not sold as of the end date.
-
- These figures are then combined, resulting in a figure representing
- your overall performance:
-
-
-
-
-
-
-
-
-
-
-
-
- Capital Gainz Users Manual 20-11
-
-
-
-
- begin_price = first price found after begin date
- initial_value = open shares at begin date * begin_price
- end_price = last price found before end date
- end_value = open shares at end * end_price
- sell_amt = total amount of sales over the period
- sell_comm = total selling commissions over the period
- buy_amt = total purchase amount over the period
- buy_comm = total purchase commissions over the period
- distributions = total dividends, interest, and capital
- gains received over the period
- fees = total fees paid over the period
-
- (end_value)
- + (sell_amt - sell_comm)
- + (distributions - fees)
- - (initial_value + buy_amt + buy_comm)
- ───────────────────────────────────────
- = total_period_return = performance
-
- 20.7.1 Performance Return and Rate
-
- The return calculated for Performance uses annualized purchase
- amounts.
-
- To account for partial periods:
- factor = days_not_owned/period_days
- adjustment = sum(purchase multiplied by factor)
-
- For distribution reinvestment:
- net_buy_amt = buy_amt - distributions (distributions reinvested)
- net_buy_amt = buy_amt (distributions not
- reinvested)
-
- total_period_return
- return = ───────────────────────────────────────── * 100
- initial_value + net_buy_amt - adjustment
-
- or, if you included commissions in the basis:
-
- total_period_return
- ─────────────────────────────────────────────────────────────── *
- 100
- initial_value + net_buy_amt + buy_comm + sell_comm - adjustment
-
- begin_value = initial_value + net_buy_amt - adjustment
- end_value = begin_value + total_period_return
-
- end_value 1
- rate = ( ─────────── ^ ───── - 1 ) * 100
- begin_value years
-
-
-
- 20-12 Capital Gainz Users Manual
-
-
-
-
- 20.7.2 Example - Performance
-
- Let's look at an example using the Twentieth Century Vista mutual
- fund between 1/ 1/90 and 12/31/91:
-
- begin_price = 8.51 on 1/08/90
- initial_value = 307.99
- end_price = 11.93 on 12/27/91
- end_value = 1339.56
- sell_amt = 510.00
- sell_comm = 0.00
- buy_amt = 1200.00
- buy_comm = 0.00
- distributions = 0.00
- fees = 10.00
-
- (1339.56)
- + (510.00)
- + (-10.00)
- - (307.99 + 1200.00)
- ──────────────────────
- = 331.57 = performance
-
-
- net_buy_amt = 1200.00
- adjustment = 963.77
-
- 331.57
- return = ────────────────────────── * 100 = 60.93%
- 307.99 + 1200.00 - 963.77
-
- begin_value = 307.99 + 1200.00 - 963.77 = 544.22
- end_value = begin_value + 331.57 = 875.79
-
- 875.79 1
- rate = ( ───────── ^ ─── - 1 ) * 100 = 26.86%
- 544.22 2
-
- 20.7.3 Example - Adjustments
-
- Calculating the adjustment to annualize partial period holdings is
- somewhat complex. Here's selected purchase information for the
- Twentieth Century Vista example, which used a date range of 1/ 1/90 to
- 12/31/91:
-
-
-
-
-
-
-
-
-
- Capital Gainz Users Manual 20-13
-
-
-
-
- ...
- 9/ 7/89 Buy 5.834 shares at $8.57 for $50.00
- (Sold on 8/ 6/90)
- ...
- 4/ 9/90 Buy 6.010 shares at $8.32 for $50.00
- (Sold on 8/ 6/90)
- ...
- 6/ 7/90 Buy 5.495 shares at $9.10 for $50.00
- ...
-
- The 9/ 7/89 purchase is after the first date of 1/ 1/90, so it's
- treated as:
-
- 9/ 7/89 Buy 5.834 shares at $8.51 for $49.65
-
- The $8.51 price is the first price in the specified range. The
- adjustment is:
-
- 49.65 * (512/730) = 34.82
-
- The specified range is two years, or 730 days, and this purchase was
- only held from 1/ 1/90 to 8/ 6/90, a period of 218 days. (730 - 218 =
- 512 days not held.)
-
- The 4/ 9/90 purchase is after the first date, and the adjustment is:
-
- 50.00 * (610/730) = 41.78
-
- This purchase was only held from 4/ 9/90 to 8/ 6/90, a period of 120
- days.
-
- Finally, the adjustment for the 6/ 7/90 purchase is:
-
- 50.00 * (157/730) = 10.75
-
- This purchase was held from 6/ 7/90 to the 12/31/91 ending date, a
- period of 573 days.
-
- The sum of the adjustments on purchases from 8/ 07/89 to 12/ 9/91
- is 963.77. This adjustment is subtracted from the divisor when
- determining return percentage.
-
- Commissions on purchases during the period are also adjusted.
-
- 20.7.4 Interpreting Performance
-
- Any calculation that annualizes amounts understates potential
- fluctuation, as well as risk. For instance, if you purchase 10 shares
- of a security at $10 at the beginning of the year, 10 more shares at
- $5 in the middle of the year, and the security is worth $10 at the end
- of the year:
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- 20-14 Capital Gainz Users Manual
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- Return : $200 - ($100 + $50) = $50
- Return%: $50/($100 + ($50 - ($50 * .5))) = 40%
-
- However, had you invested all $150 at the beginning, you would have 0
- return.
-
- The rate of return calculated by Capital Gainz results in figures
- very close to the Internal Rate of Return. In fact, a sample of 18
- securities showed the two rates to be within 1% of each other 17
- times, and the 18th case showed only a 1.5% difference.
-
- 20.7.5 Performance Graph
-
- The Performance Graph in the Capital Gainz Graphics Program
- illustrates the relationship between the various factors that
- contribute toward your performance. Two equivalent pie charts are
- displayed. The first pie chart shows the end_value, sell_amt -
- sell_comm, and distributions - fees. The second pie chart shows the
- initial_value, buy_amt + buy_comm, and the return. The return pie
- piece is exploded from the chart. For more information, see Chapter
- 19.
-
- 20.8 Total Return vs Performance
-
- ===>>> Since the total return figure represents a buy-and-hold
- strategy, you can compare it to whatever strategy you used over the
- period. If you used dollar-cost averaging, then see if that worked
- better than a buy-and-hold approach. For example, the total return for
- Twentieth Century Vista from 1/1/90 to 12/31/90, was 40.19%, with a
- yearly rate of 18.40%. We saw in the performance example that our
- performance during that same period resulted in a return of 60.93%,
- with a yearly rate of 26.86%. Thus, the timing of purchases and sales
- allowed us to do better than if we invested everything at the
- beginning of the period.
-
- If your actual performance was under par, but the total return is
- good, then you've adversely affected your performance through poor
- timing. The security is a good-performer, and should probably be held.
- This effect is common for dollar-cost averaging strategies employed
- over a short period in a rising market.
-
- If your performance was good, but the total return is under par,
- then you've managed to increase returns through good market-timing.
- While a buy-and-hold strategy would not have done well, the market-
- timing effects of your purchases and sales made this security a
- winner. This effect is common for dollar-cost averaging strategies
- employed over a long period in a fluctuating market.
-
- ===>>> Overall, total return is probably the most revealing of the two
- figures, especially for mutual funds. It clearly shows whether a fund
- performed well or not, regardless of any attempt at market timing. In
- Performance, unsuccessful market timing can hide good fund
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- Capital Gainz Users Manual 20-15
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- performance, and successful market timing can hide poor fund
- performance.
-
- 20.9 Price History
-
- Price history allows you to quickly view a security's prices for
- given intervals. Distributions over the period are shown to help you
- account for price dips, since, for example, a $10 stock should fall to
- $9 after a $1 dividend.
-
- The high/low prices and dates, monthly average price, and
- distributions per share over the period are given at the end of the
- report. The individual high and low prices are flagged with an H or an
- L. The monthly average price calculation was discussed earlier.
-
- 20.9.1 Example - Price History
-
- Generally, you'd like to see a steady or gradually increasing
- price for income producing securities. Here's a year's worth of prices
- for Carolina Power and Light, an income-oriented utility stock:
-
- Date Price Distribution/share
- H 12/27/91 $52.6250
- 11/27/91 $49.6250
- 11/01/91 DIV $0.7600
- 9/28/91 $49.1250
- 8/31/91 $47.3750
- 8/01/91 $47.4200
- 8/01/91 DIV $0.7600
- 7/27/91 $47.0000
- 6/29/91 $45.6250
- 6/01/91 $46.2500
- 5/02/91 $48.0580
- 5/02/91 DIV $0.7600
- 3/30/91 $47.5000
- 3/21/91 $47.2500
- 3/18/91 $47.8070
- 3/04/91 $47.2420
- L 2/01/91 $45.2920
- 2/01/91 DIV $0.7600
- 1/02/91 $46.6520
-
- High: $52.6250 on 12/27/91 Monthly Avg : $47.8266
- Low: $45.2920 on 2/01/91 Distribution: $3.8000
-
- For growth securities, you'd like to see more of a general up-
- trend to make up for the lack of regular dividends.
-
-
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- 20-16 Capital Gainz Users Manual
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- 20.9.2 Price Graphs
-
- You can generate line graphs representing security prices using
- the Price Graphs option in the Capital Gainz Graphics Program. The
- graphs are drawn on a grid, with prices and dates labeled on the axis.
- Additional lines are drawn for the average, standard deviation, and
- best-fit. You can also graph two securities at one time. The first
- security's prices are listed on the left vertical axis, and the
- second's on the right vertical axis. By overlaying the two price
- lines, and scaling the prices accordingly, you can compare the two
- price trends. These graphs are described in detail in Chapter 19.
-
- 20.10 Portfolio Allocation
-
- The Portfolio Allocation Report gives you a quick look at how your
- investment dollars are spread out. Thus, you can see if you're being
- conservative or risky, and weigh this against your feeling on where
- the market's headed.
-
- Determining factors for your portfolio's weightings include how
- much cash you need, how old you are, and your bullishness or
- bearishness on the market. One rule of thumb is: the shorter term your
- needs are, the more conservative you should be. If you are older and
- will soon need the cash for retirement, a market downturn would be
- catastrophic for an aggressive growth-oriented portfolio. However,
- this same market downturn would be unwelcome, but not devastating, to
- a young investor. This younger investor has time on his side, and will
- have many chances to recoup any losses and ride the market back up.
-
- 20.10.1 Example - Portfolio Allocation
-
- Here's an example of a moderately aggressive portfolio:
-
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- Capital Gainz Users Manual 20-17
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- ────────────────────────────────────────────────────────────
- Local Security Value Pct
- ────────────────────────────────────────────────────────────
- FPDLI Fin Prog Daily Income $14,372.76 28.17%
- PFZ Pfizer Inc. $6,308.81 12.36%
- CPL Carolina Power & Light $6,240.85 12.23%
- FPTXF Fin Progress Tax Free $5,082.13 9.96%
- NUVNC Nuveen NC Tax Free Trust $4,838.26 9.48%
- GRACE W.R. Grace $3,848.53 7.54%
- FPINC Fin. Prog. Industrial Inc $3,034.27 5.95%
- PSNC Public Srvc Co of NC $2,808.68 5.50%
- KRG The Kroger Co $1,806.82 3.54%
- FPEUR Fin. Prog. European $1,348.78 2.64%
- VISTA 20th Century Vista $1,339.56 2.63%
- ────────────────────────────────────────────────────────────
- Security Type Value Pct
- ────────────────────────────────────────────────────────────
- LCS Large Company Stock $18,205.01 35.68%
- MMF Money Market Fund $14,372.76 28.17%
- TFBF Tax Free Bond Fund $9,920.39 19.44%
- LCSF Large Company Stock Fund $3,034.27 5.95%
- SCS Small Company Stock $2,808.68 5.50%
- FSF Foreign Stock Fund $1,348.78 2.64%
- SCSF Small Company Stock Fund $1,339.56 2.63%
- ────────────────────────────────────────────────────────────
- Security Class Value Pct
- ────────────────────────────────────────────────────────────
- Stock $21,013.69 41.18%
- Cash $14,372.76 28.17%
- Bond Fund $9,920.39 19.44%
- Stock Fund $5,722.61 11.21%
- Total $51,029.45 100.00%
-
- More than 40% of the portfolio is in stock holdings, 28% is in cash,
- and the rest is in stock and bond mutual funds.
-
- 20.10.2 Portfolio Allocation Graph
-
- The Portfolio Allocation Graph in the Capital Gainz Graphics
- Program shows three different pie charts representing your portfolio.
- The first pie chart breaks down your holdings by security class, the
- second pie chart by security type, and the last pie chart by security.
- The largest part is exploded from each chart. The Portfolio Allocation
- Graph is described in Chapter 19.
-
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- 20-18 Capital Gainz Users Manual
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