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How to allow for share inheritance, Assessing returns allowing for capital inflow

Hi all
I have two questions
I received an inheritance of 3000 Commonwealth Bank shares from my father when he died. The cost base of those shares on average was $23 as bought them over many years before that. Obviously the share price has gone up dramatically from that cost base but it’s not really fair to include this capital gain as part of my return. Is it possible to remove that single transaction from my return figures to get a better idea of the return of the portfolio. I also have some other shares that were also inherited at the same time that I’d also like to remove from the portfolio temporarily for the same reason. Another way of assessing the realistic return figure might be to use as the cost base the price the shares traded at on the day they were transferred to my portfolio – is there a way of doing that temporarily?
Second question:- is it possible to view your returns in a way that allows for buying additional shares? I have heard of something like the modified Dietz method that allows for adding capital amounts and gives a percentage return figures given that truly reflects returns (ie. somehow eliminates the effect of adding extra capital)
Thanks for your help
Regards

Terry
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  • Terence,

    On the issue of your inherited shares I would put an opening balance at the time your father bought the shares (or put in all the transactions if there are multiple and you want to do the work). When you look at the performance of the portfolio with a starting point after this date -- e.g. when you inherited them -- the system will use the price at the start of the performance period, it will not distort the performance.

    On the question of adding shares, the system already caters for this. Our return calculations, which incidentally are quite similar to the modified Dietz method you mention, will adjust for increases and withdrawals of capital. In other words adding capital doesn't change the return, only the return on that capital is counted.

    Hope that helps,

    Andrew Bird
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