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Strategies & Market Trends : Quicken - Problems and Answers....

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Nov 7 9:30 AM EST

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To: stock bull who wrote (1213)	12/31/2007 3:28:49 PM
From: Jurgis Bekepuris	Read Replies (1) of 1539

IRR in Quicken. Partly reposted from another thread. Have any of you had success of getting reasonable return rate calculations for accounts that have cash inflows and outflows? IMHO, Quicken does not do very well on them... Here are some things which complicate the rate of return calculations assuming inflows/outflows: - Start with $1000. Add $10000, earn 4% = $400, withdraw $10000. End with $1400. 40% return? Not really, IMO. - Start with $1000. Earn 20% return = $200. Add $1000 in December. End with $2200. 10% return? Not really, IMO. - Combine the two above and your head starts to spin. It seems that Quicken calculates the return using something like the following: -In = Sum initial amount and all inflows -Out = Sum remaining amount and all outflows - Divide Out/In or divide (Out-In)/In This somewhat takes care of the first issue, but does not take care of the second issue. It also does not take care of the following variant of the first issue: - Start with $1000. Earn 20% on it. Temporarily add $10000 for two days, earn nothing for 2 days, withdraw $10000. Quicken says: 1000+10000=11000. 1200+10000=11200. 11200/11000=1.018 = 1.8% rate of return. Is this fair/correct? Not really, IMO. You only invested $1000. But if that $10000 earned anything, you have to account for it too... All examples are exaggerated for clarity, but all of them occur in reality. So is there a way to get "correct" rate of return on accounts with inflows and outflows or not? Is there at least something that you can point to and say "this IRR would be the IRR an auditor would determine if he examined this account as if it was a mutual/hedge fund"?

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