Cal:

Unfortunately, it doesn't. I read that article while researching the
issue and it does not appear to agree with my findings. Specifically,
at the end of the article is this statement:

"Reinvested dividends or interest are not counted as cash flow. Such
transactions are sum-zero from a cash flow point of view. The funds
which come in from the income item are immediately used to purchase
more securities. The income from the transaction affects the
performance later, either as a sale or in the default return of capital
item. "

My example below appears to contradict that. The only cash flow during
the year was reinvested dividends and cap gains and so they should not
affect performance but apparently do in Money.

I'm still also not clear on why this calculation is the relevant number
that an investor would want to look at to compare his investment
returns. It appears to under represent the actual return received for
an investment.

Please don't take the above as implying that Money is doing something
wrong...I'm just asking in an attempt to understand how to interpret
the data.

Jeff

Cal Learner-- MVP wrote:
- quote -

In microsoft.public.money, Jeff M wrote:

- quote -

See if http://support.microsoft.com/kb/131664/en-us helps.

I've been looking at my end of year returns using Money 2007 and am
trying to understand the numbers. I read in other posts in this group
that Money uses the IRR to calculate the Total Return.

Here's an example:

I have the Vanguard REIT Index which I purchased prior to the start of
2006. The only additions to it during 2006 were the reinvestment of
dividends and capital gains throughout the year. No fees were charged
and no money was withdrawn from the account.

Vanguard indicates that the return for this fund for the year was
35.07%. Money indicates that my return was 33.3%.

If I change the "As of" date in the portfolio and look at the market
value of my fund holdings on 12/31/06 and compare that to the market
value today, subtract the two and divide by the former value, I get the
35.07% that Vanguard reports. So this indicates that in fact, the
value of my fund went up 35.07% during 2006. Quicken has a ROI field
that reports this same number in its portfolio.

There were four dividend distributions in the fund and one cap gain
distribution. These should have no effect on the return for the fund
since the distributions were immediately reinvested; but they do. I
checked the previous calculations for various dates prior to the first
dividend distribution in March 06 and the Money Total Return matched
what I expected from my calculation method above. Once the first
distribution hit in March, the Money return was underrepresented from
what I calculated.

Apparently, the IRR calculation provides a non-compounded rate of
return. In other words, it's giving me the equivalent savings APR
rather than the equivalent APY? I checked this out using an online
savings calculator to compare compounding daily vs annually and the
33.3% that money is reporting is not equivalent to the 35.07% if I
assume the 33.3% is daily compounding vs 35.07% as annual. It turns
out that 30.075% compounded daily would give me an annual return of
35.07%. So I'm not completely sure what Money is reporting or maybe I
am misunderstanding IRR.

I'd appreciate if someone that understands the Money return calculation
could shed some light on what Money actually calculates and more
importantly how the result can be interpreted?

Thanks.

Jeff