Gain, Market Value, Cost Basis

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Percent Gain

Percent Gain can be expressed as the following:

         Gain
Gain % = ----------
         Cost Basis

Gain

Gain is defined as: The profit or loss on a security or portfolio expressed in dollars; Equal to income plus price appreciation.

The basic formula is:

[(Amount Sold - Amount Paid) + Income Gain - Costs]

Unrealized Gain

Gain = Amount Paid - Shares(Units) at Last Quote Price (when available) or latest trade recorded 

Realized Gain

Gain = Amount Paid - Shares(Units) at User provided Asset Cost Basis (when available) or Average Cost Basis (calculated automatically)

Income

Income is defined as:

Interest, dividends, and capital gains distributions that you have received for an investment.

Price Appreciation

Price Appreciation is defined as:

How much an investment has appreciated in price. It is computed as market value less cost basis. If "show sold securities" is enabled, it also includes realized gains.

Market Value

Market Value is defined as:

The current value of an investment as indicated by the latest trade recorded.

Average Cost Basis

The cost basis represents the original value of an asset that has been adjusted for stock splits, dividends and capital distributions. It is important for tax purposes because the value of the cost basis will determine the size of the capital gain that is taxed. The calculation of cost basis becomes confusing when dealing with mutual funds because they often pay dividends and capital gains distributions usually are reinvested in the fund.

For example, assume that you currently own 120 units of a fund, purchased in the past at a price of $8 per share, for a total cost of $960. The fund pays a dividend of $0.40 per share, so you are due to receive $48, but you have already decided to reinvest the dividends in the fund. The current price of the fund is $12, so you are able to purchase four more units with the dividends. Your cost basis now becomes $8.1290 ($1008/124 shares owned).

Internal Rate of Return (IRR)

The Internal Rate of Return (IRR) is a standard accounting formula that provides a reliable way to compare the performance of different types of investments.

The return is calculated over the full date range of transactions for the investment, which provides a more realistic approximation.

The IRR is defined as the discount rate at which the present value of all cash flows related to an investment sum to zero. IRR can be equated to the bank interest rate that would give the same performance as the investment in question. Represented mathematically, the IRR is:

 Newton-Raphson technique. Formula: sum( cashFlow(i) / (1 + IRR)^i)

See Die Interne-Zinsfuß-Methode for detailed description

The following items are counted as cash flow:

• Cost to buy an investment: The cost basis of the investment is a negative cash flow on the day the investment is purchased.

• Dividends, Interest, Capital Gain Distributions, Other Income associated with an investment: The amount of any of these items is a positive cash flow on the transaction date.

• Sale proceeds: The proceeds from a sale (price multiplied by quantity, less commission) is a positive cash flow on the transaction date.

• Other expenses associated with an investment: This type of transaction is a negative cash flow on the transaction date.

• Default Return of Capital: The ending market value of the investment is credited as a positive cash flow on the last day of the reporting period.

Reinvested dividends or interest are not counted as cash flow. Such transactions are sum-zero from a cash flow point of view. The funds which come in from the income item are immediately used to purchase more securities. The income from the transaction affects the performance later, either as a sale or in the default return of capital item.