Social


9

How To Track Your Dividend Investment Performance

Blank Sheet of Paper

Image by mark78_xp via Flickr

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.

Tracking Investment Performance

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.

Investment Account Performance

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?

Enhanced by Zemanta
Sign Up for my FREE Money Tips Newsletter!

9 Responses to "How To Track Your Dividend Investment Performance"

  1. Great article! I had the same problem with Quicken and Money they are not very good at producing accurate ROI when it comes to dividends. I just ended up using excel.

  2. Good information. I also track my dividend income / performance using excel as well. I only wish someone could invent a computer program that could automatically calculate all the types of returns investors need to know – total return, annualized return, vs. the sp500, etc.

    • The Passive Income Earner says:

      Thanks Dividend Pig. The other issue I have with software is that they don’t always show you the math they use. If they do it differently, than you are not getting what you need.

  3. Hey Passive,

    It’s a shame that every brokerage can’t do this for its clients. I do know that Q-Trade is fabulous as a performance tracker. RBC is taking a crack at it, but relative to Q-Trade’s tracking, it’s not very good.

    Vanguard, in the U.S., also lets you see how much you’ve deposited, what the account is worth, what the gains have been etc.

    But I don’t have any of the above luxuries, as an expat Canadian. I do use Globeinvestor’s portfolio tracker, but it isn’t entirely accurate. When there’s a currency swing between the U.S. and Canadian dollar, Globeinvestor’s tracker does not track the account accurately, with that currency swing in mind. If the dollars stay somewhat stable (yeah, right) then Globeinvestor is accurate. I spoke to a friend who works for the Globe and Mail, and he noticed the same thing. Then I emailed the technician in charge. But I don’t think anything was changed. C’est la vie.

    As a non Canadian resident, I can’t use Q-Trade. But if I lived in Canada, I definitely would, even considering the slightly higher commissions charged on purchases. For me, it would be worth an extra $100 a year. They do an amazing job of tracking performances, benchmarking it, showing performance charts etc.

    While I’m bashing Globeinvestor, has anyone seen their performance chart? It’s pretty crude. If you don’t add fresh money, it looks like you’ve been slowly withdrawing money, based on the chart of account performance they provide. The red line (money deposited) drops over time for some mysterious reason. Bummer.

    • The Passive Income Earner says:

      Thanks for the comments Andrew!

      The more I setup my spreadsheet, the more I want to solve that problem. Unfortunately, my spreadsheet doesn’t give me an easy way to compare against a benchmark or to handle currency exchange at the moment. I guess there is a market for such software after all … as long as its built by someone that understands what is important to look at.

  4. Check out the second chart at

    http://rwinvesting.blogspot.com/2011/04/how-are-your-investments-performing.html

    Schwab lets you combine accounts however you want and produces time weighted performance up to the date before.

    If you do it yourself you have to value the portfolio every time an inflow or outflow occurs, link the returns, and get a time dependent root to put on annual basis.

  5. Thomas Babington Macaulay says:

    Good one, by the way I am a news correspondent, I am trying to write an article on Stephen Dattels as far as I got to know he is discerning investor. He has organized and made successful plays in various commodity ventures, including assorted gold, iron ore, coal, copper and uranium ore developments. Any further information about him will help me a lot.

Leave a Reply

Submit Comment
*

Copyright © 2010 - 2014 The Passive Income Earner. All Rights Reserved.
Powered by Liquid Web on Theme Junkie.
More in Dividends, How To, Investing
Investment Return
How To Track Your Dividend Income

Close