Help! I need to find poorest performing mutual funds.

I've converted a lot of money from IRA to Roth and need to pay for the resulting income tax bill by selling some of my non-IRA investments. I have quite a bit of history in a number of mutual funds and need to figure out which ones have performed the worst for me; those are the ones I'll sell.

This is not normally something I do, so I'm not familiar with the best tools. Can anyone suggest which of Quicken's reports might be the right ones to run to evaluate better or poorer performers among my investments? I use Quicken Deluxe 2009.

Thanks for your suggestions.

Reply to
Gary
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Thanks, Tom. Seems like a good suggestion and I'm going to work with it starting this morning.

But there are things in Quicken that confuse me ... they seem contradictory. Since you obviously have experience working with them, perhaps you might know what I'm dealing with, and therefore, what decisions I might make.

Here's an example where two methods give seemingly incompatible results. It's my investments in Franklin Templeton's Mutual Qualified (now Mututal Quest) find.

Looking at the IRR to suggested, this seems like a positive winner; I get

Investment Performance - ETD

4/11/1983 through 1/3/2010

Date Account Action Description Investments Returns Avg.?Ann

4/11/1983 - 1/3/2010

4/11/1983 Beg Mkt Val 0.00

7/22/1996 Frnkl Te... BoughtX 33.113 Mut Qualified 1,000.00

5/29/1997 Frnkl Te... BoughtX 168.729 Mut Qualified 3,000.00

7/9/1997 Frnkl Te... Bought 162.338 Mut Qualified 3,000.00

8/1/1997 Frnkl Te... Bought 157.398 Mut Qualified 3,000.00

1/3/2010 End Mkt Val 27,512.63

TOTAL 4/11/1983 - 1/3/2010 10,000.00 27,512.63 8.36%

Looking at the Overview section of the account it seems like a real loser; I get

Quote/Price Shares Market Value Cost Basis Gain/Loss Gain/Loss %

Mut Qualified 17.24 1595.86 27,512.63 28,581.21 -1,068.58 -3.74

It seems as if the IRR calculation (8.36%) doesn't take into account reinvested dividends as part of the cost. Probably I haven't set something properly ... I can't believe Quicken wouldn't consider them.

Reply to
Gary

This is kind of confusing, but both ways of looking at this investment

*are* correct.

On the one hand, think about this investment like a CD that you can add to from time to time and where interest is credited to your account. The CD matures on 1/3/2010. You opened the account back on

7/22/99 with $1,000, then added to the account at $3,000 a pop on 5/29/97, 7/9/97 and 8/1/97. From the date of your last deposit until 1/3/2010 you were on an extended trip to the far side of the moon so you never saw a statement from the bank and never even though about the account until you returned from your trip. On 1/3/2010 you walk into the bank and say "gimme all my money" and they hand you $27,512.63. The math says you got an annual return of 8.362% for the time that account was opened. Period. End of Story.

Now, take that exact same account but we'll say that the account when you opened it promised you 8.69% until maturity on 1/3/2011. Every month the bank emailed you a statement on the 3rd of the month showing interest credited and the account's balance. You immediately entered this information in Quicken and watched your money grow. On 1/3/2010 you got the bank's statement, as usual, and entered that month's interest. How much money does Quicken show in the account? Why, it's $28,581.21! However, on that same day an emergency comes up and you need some big money RIGHT NOW! You go running down to the bank and say "gimme all my money," to which the teller says "there's a penalty for early withdrawal in the amount of $1,068.58" and hands you a check for $27,512.63. You go home and zero out the account, 1st crediting the account for $27,512.63 (that's the amount you deposited in your checking account) and then crediting the account for $1,068.58 to a category called "Penalty for early withdrawal" which could also be considered a "loss on sale."

So, yes, if you sold your fund today you'd "lose" $1,068.58 and you'd have received a return on this investment of 8.362%.

Tom Young

Reply to
TomYoung

And, to add to what I wrote above, let's say you made the exact same investments on the exact same dates in another fund, a different fund than the Franklin Templeton's Mutual Qualified. Just by luck, on the dates when this other fund declared and reinvested dividends the share price was in the toilet and, after accounting for the initial purchases and reinvested dividends your cost basis in the fund was $22,913 vs. a market value of $25,111 for a gain of $2,198! YES! However the IRR on this fund is only 7.58%.

Which fund would you rather have owned?

Tom Young

Reply to
TomYoung

Excellent examples, but now it's getting very complex. Something like the old joke about draining the swamp!

Remember my original objective was to determine which fund or funds to cash in to pay for my IRA to Roth conversions? The question remains, which of the two approaches (Gain/Loss or IRR) will give me better guidance for fund selection? The two approaches point to different funds.

Reply to
Gary

Thanks a lot for your comments. Consensus among those close to me is to sell the fund with the maximum loss and take advantage in my taxes (especially the year I convert IRA to Roth and am in a higher marginal bracket).

Reply to
Gary

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