NCA Software
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NCA Software In this month's meeting we noticed that one of the stocks in our portfolio was showing a "wrong" total return, all of the other numbers however were correct, as far as I can tell. Here are the numbers: On 9/20/00 we bought 6 shares of XYZ for $15/share and a $12 commission (kinda stupid I know...). Then on 5/21/01 we bought 26 shares of XYZ for $16.27/share and a $12 commission. So our average cost per share is 16.782 our total cost is $537.02 and at a current price of $15.95 our current value is $510.40. As far as I can figure that is a loss of about 5% and the CAR is about a loss of 30%. In bivio this is what is shown, is the 30% loss. However, in NCA it is shown with a total return of a loss of 23% and a CAR of about 30%. So for some reason the total return in the NCA software is showing a loss of 23% vs. the REAL loss of 5%. Anyone have any ideas as to where this error could be coming from, all of our other stocks seem to be correct. I have been beating my head upon my keyboard trying to figure this out. My next step is to delete that stock from NCA and the re-enter all of its data and see if that solves it. Thanks, for any help. Tim Chatterton Hi Tim,
You wrote.....
In this month's meeting we noticed that one of the stocks in our portfolio was showing a "wrong" total return, all of the other numbers however were correct, as far as I can tell. Here are the numbers: On 9/20/00 we bought 6 shares of XYZ
for $15/share and a $12 commission (kinda stupid I know...). Then on 5/21/01 we
bought 26 shares of XYZ for $16.27/share and a $12 commission. So our average
cost per share is 16.782 our total cost is $537.02 and at a current price of
$15.95 our current value is $510.40.
As far as I can figure that is a loss
of about 5% and the CAR is about a loss of 30%. In bivio this is what is shown,
is the 30% loss. However, in NCA it is shown with a total return of a loss of
23% and a CAR of about 30%. So for some reason the total return in the NCA
software is showing a loss of 23% vs. the REAL loss of
5%.
Actually, on an *annualized* basis you have a real
loss (CAR) "of about 30%". Beyond that, the "Total
Return", as reported in NCA, seems to cause more confusion for most clubs than
it's worth, see http://www.better-investing.org/clubs/ladies.html . Thus,
bivio has elected to leave the "Total Return" calculation
off of the performance reports and only report the annualized internal rate
of return (CAR). If you are really glutton for more punishment you
can delve into the following explanation of NCA's return calculations
at http://www.better-investing.org/clubs/calculations.html
In simple terms, let's look at this another
way. Let's say that you have $1000 invested in a stock that pays
a 10% annual dividend. The dividend is paid each
quarter. How much dividend do you expect to get each
quarter? The correct answer is $25 a quarter, $100 a
year. You could look at this dividend in the same way that you look
at the performance reported by your accounting software. After
one quarter you've received $25 on a $1000 investment. Yes, you've only
received a 2.5% "real" return, however, on an annualized basis you've received a
10% return. Unfortunately, as in your case, the process of
calculating rates of return gets even more complex when you have multiple cash
flows into or out of an investment. You'll find a more detailed
explanation of these calculations at https://www.bivio.com/hp/investment-performance-report.html
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