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Cost Basis Question
Old 11-29-2008, 06:41 AM   #1
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Cost Basis Question

Since I have been retired for over 5 years and have not been able to add anything to my retirement portfolio I am wondering where I stand since I stopped adding money to the pot. Would comparing the cost basis/share of each fund against a current NAV be a fairly accurate way of doing this? If not, what would be the best approach for a fund by fund accounting?
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Larry
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Old 11-29-2008, 06:52 AM   #2
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My Vanguard account tracks this automatically, as part of the account status information.
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Old 11-29-2008, 08:10 AM   #3
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Thanks for the quick reply. I went to the VG site but could not find what I was looking for. We need to use some of our retirement money to augment our pension. I wanted to set up a spread sheet where I could determine which of my funds ( I have a S&D approach with 19 funds) are profitable. Since we stopped adding money over 5 years ago, and started many years before that, I wanted to get a sense of if and when a particular fund I have is still on the plus side. I thought using the cost basis of each fund and comparing it to a current NAV would give me an indication of what I actually paid for the fund share vs what the share price is today (or any day I choose). I am not totally sure what "cost basis" means. Is it the average cost per share that I paid over time? Does it include reinvestment of dividends & capital gains?
This is where my confusion is. If VG has a place where this particular info is located and where I don't have to jump from fund to fund (hence my spreadsheet where it is all on one page) please help me navigate to it on the VG site.

If others have some advice or suggestions, please jump in.
Larry
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Old 11-29-2008, 08:24 AM   #4
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19 funds? You are way over diversified.

I suspect you've been letting the dividends be reinvested in the after tax accounts. That creates a 1040 Sch D nightmare. I tried to clean up my FIL's accounts when we sold his funds out to pay for his care. I ended up having to estimate the purchase price for funds that were reinvesting back before the days of computers. The fund company had records for aboout the last 10 years. Before that I assumed he originally invested a "round number" and went from there. Fortunately, the IRS did not audit his return (so far).

About all you can do is try to get what records you can from the fund or brokerage company. Then you get to guess a "reasonable" purchase price and move on. Hope you don't get audited.

This is why it's risky to reinvest dividends in after tax accounts.

If they are in IRA's, 401k's or Roths, it doesn't matter.
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Old 11-29-2008, 08:29 AM   #5
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They are all IRA accounts.
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Old 11-29-2008, 08:41 AM   #6
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They are all IRA accounts.
Thanks
Larry
That explains it. VG doesn't give cost basis for tax deferred accounts. I agree with above comments - this may be a needlessly complicated approach, but then I'm a Boglehead convert.
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Old 11-29-2008, 08:45 AM   #7
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You should look at the annual statements that you have saved each and every year. As written above, you cannot use the NAV to determine performance because of dividends and capital gains that the funds pay out periodically. You might be able to look at your statements in 2003 to see the value of your funds then. Look online to see the value today (or look at the most recent statement). If you divide the 2003 numbers into today's numbers, you will get the performance. This ignores any withdrawals you made.

Of course, if you have just let the funds sit there for 5 years and have reinvested all the distributions, you can just simply use Vanguard's performance numbers for the funds.
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Old 11-29-2008, 09:18 AM   #8
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They are all IRA accounts.
Thanks
Larry
If they are all IRA accounts, why do you care? They are worth what they are worth and will be taxed as ordinary income when you take them out.
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Old 11-29-2008, 10:06 AM   #9
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Since we need to take out $ from these funds to augment our pensions, I have always just taken profits from funds that have done well and then rebalance. In order to protect us from times like these, I would move a few years of anticpated withdrawals, parking the surplus in an IRA money market. Don't like to withdraw during bad times unless necessary. Each time I have done that, I would go over the price history of each fund determining what I paid per share when I bought and what it was at the time to determine profitability. Perhaps this was overly complicated and I recently thought of creating the spread sheet with the cost basis of each fund and use that to compare with a current NAV to determine profitability (not likely these days). I am a very concrete kind of guy with limited math skills so this seemed the most direct. Would simply looking at performance data give me the same basic info?
I know 19 funds are a bit much, but with research, I believe I created a well diversified AA with a 55/45 split as my current goal. VG, Quicken, and Excel has taken some of the complexity out of managing this number.
Thanks again for your continued input.
Larry
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Old 11-29-2008, 10:30 AM   #10
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I think looking at performance is not the right way to do it. May I suggest an alternative method which encapsulates the same kind of idea: Set up your asset allocation and then just rebalance as needed. This way you will automatically be selling the better performers.

So decide how much (the percentages) equities versus fixed income you want. Of the equities, decide how much in domestic and foreign. Of the equities, how much in large cap and small cap; how much in value and blend. Of the fixed income: how much in short-term, intermediate term, TIPS, Treasuries, CDs, etc.

When you withdraw and/or rebalance you can see if any percentages are higher than you want. Withdraw from those first. If any percentages are lower than you want, maybe move from of the higher stuff to the lower stuff.

But move away from the "funds" approach to the "asset allocation" approach. I'm sure you have all this in your spread sheet already.
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Old 11-29-2008, 02:31 PM   #11
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...I know 19 funds are a bit much, but with research, I believe I created a well diversified AA with a 55/45 split as my current goal...
you have company - 18 mutual funds and one ETF here.
4 of my MFs were inherited Roths and are untouchable til i turn 59 1/2.
i have several specialty funds with small to medium stakes as my "play zone" for higher risk and overall diversifiers.
i checked my stock intersection stats, and it is not as bad as one would think. i suspect yours is not neither.
my plan is to trim those back when it makes sense to, either due to my AA migration plan or to harvest a tax loss. all in good time...
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