I have a live portfolio. I’d like to manually sell a fraction of the holdings by adding a “removing cash” transaction while maintaining the current portfolio. How do I do this?
I wish there was an option to hedge to cash by a %.
Thanks,
Jeff
Jeff,
I assume you are not using the Trade functionality (The below probably works as well but I cannot be 100% sure as I do not use Trade)
What I have done many times and it worked well:
- For your live port, go to Transactions / add / Transaction type = cash / Put a negative amount i.e. -3000 if you want to remove $3k / add a comment if you want / Press “add cash”
- At the next rebalance, the logic will adjust your holdings to bring you back to ~0 cash. In others words, expect a fair number of Sell transactions next Monday (Commensurate to the amount of cash you have removed)
Regards,
Jerome
Thanks for the reply.
Are you removing cash from a book or from a portfolio?
I do use Trade. The process you mention above does not work for me unless I put in a rule to sell everything, rebalance, and then remove the rule. Problem is my current holdings change.
thanks
Hi Jeff,
Book? port? → i did it for both. Worked fine for both.
Sorry I do not know for Trade. Maybe someone else can chip in?
Jerome
Jerome, interesting idea. Doesn’t this cause a problem with your portfolio return calculations moving forward since P123 does a time weighted and not dollar weighted calculation?
I could see where calculating the return(for the port with the withdrawals) is a don’t care if one is just using that port to monitor the holdings and then using a parallel port (which has no withdraws) to monitor the actual port return. Is that how you do it? One of these days I will have to start withdrawing money from my ports and am trying to figure out a strategy to do so whilst monitoring the ports dollar weighted results. I had looked into using something like Quicken to monitor my performance, since they do dollar weighted calculations, but have decided it is too labor intensive to double enter the transactions. Any ideas how to do this are welcome.
Hi David,
umh… Now you are making me doubt (which is a good thing if I can learn something). I never spent much time on this beyond quickly reading the definitions below. I use TWR on my brokerage account rather than MWR exactly for the purpose of not being impacted by inflows / outflows.
From investopedia (https://www.investopedia.com/terms/m/money-weighted-return.asp), I thought that:
“the time-weighted returns (TWR) measure is often used to compare the returns of investment managers because it eliminates the distorting effects on growth rates created by inflows and outflows of money.”
but
“…cash outlays or inflows can impact the Money weighted returns (MWR). The money-weighted rate of return considers all the cash flows from the fund or contribution, including withdrawals. Should an investment extend over several quarters, for example, the MWR lends more weight to the performance of the fund when it’s at its largest size, hence the description “money-weighted.” The weighting can penalize fund managers because of cash flows that they have no control over. In other words, if an investor adds a large sum of money to a portfolio just before its performance rises, it equates to positive action. This is because the larger portfolio benefits more (in dollar terms) from the growth of the portfolio that if the contribution had not been made.
On the other hand, if an investor withdraws funds from a portfolio just prior to a surge in performance, it equates to a negative action. The now-smaller fund sees less benefit (in dollar terms) from the growth of the portfolio than if the withdrawal had not happened.”
Happy to learn something if I got things wrong.
Jerome
Hi Jerome, my understanding is that if you are managing other people’s money and your performance is measured as an advisor, then yes, TMR is better because you cannot control the additions or withdrawals. if that is your situation, then fine.
I manage my own investments so I would like to use an IRR approach that is dollar weighted. As an example in addition to what Quicken does, Vanguard uses an IRR approach when it reports my returns for my personal accounts. It calculates returns based upon my additions and withdraws and taking into consideration when they happened in the reporting cycle. I think that gives me a more accurate assessment for return than just TMR.
It looks like you are more interested in calculating returns as a manager than an individual investor. OK, I get that now.