Paul and P123,
Thank you for responding to me with the updated explanation. I’m glad to learn that P123 isn’t trying to break new ground by making us pay for accrued dividends out of the portfolio’s capital. haha
However, I have done some further examination of my own and am seeing consistently troubling transaction details that have the potential to be highly pernicious. Like your first explanation, I don’t think the second explanation you have provided covers these issues, but I will be glad to listen and learn if I am wrong.
As I mentioned before, these issues are seen in all my portfolios that were created a few months ago and then re-run today as exact simulation duplicates of the originals. There are small discrepancies between the two that are very devastating to total returns when added up over a 10-year or 17-year history. I would just like to get to the bottom of this, find out if there’s anything I can do to correct this situation or alternatively, let the Portfolio123 staff know that there is something very wrong so it can be corrected.
Specifically, I can see a significant difference between what P123 is showing for documentation of real-time transactions and what other sources (such as Yahoo Finance) are showing on the same transactions.
NEW, DETAILED REVIEW OF TRANSACTIONS
This is a new review of another portfolio (with its Simulation-Copy made yesterday)accompanied by more detail. To simplify the review from a 5-ETF universe, I am now looking at a different portfolio (all of my ETF portfolios are askew) that utilizes only two ETF positions: The S&P 500 (SPY) and the 1-3 Year Treasury Bond (SHY). This portfolio is a very straightforward market timing strategy. When conditions are satisfactorily bullish, it holds SPY. When conditions turn sufficiently bearish, it holds a cash proxy, i.e. SHY.
The original return of this portfolio (portid=1451777) shows a 12.79% CAGR from 01/02/00 - 11/08/17 with a total return of 756.76%.
Chart 1: ORIGINAL PORTFOLIO
Chart 2: DUPLICATE COPY MADE TODAY
A duplicate copy of the portfolio made today (portid=1510084) shows a 10.83% CAGR and a total return of 527.23% (-229.53% less).
I will narrow this down by only reviewing the portfolio’s transactions from its launch in January 2000 through to the end of April 2001 (only 16 months). In the original Live Portfolio (portid=1451777), there are fewer transactions than the Simulation Copy (portid=1510084) for this period and transactions are occurring on different dates.
Chart 3: ORIGINAL PORTFOLIO TRANSACTIONS
Chart 4: TRANSACTIONS FROM SIMULATION-COPY MADE TODAY
A duplicate Simulation-Copy of the portfolio made today shows incorrect amounts for the dividend payments and does not include several dividend payments within the first 25 transactions!
ANALYSIS
During the period examined, from January 2000 to April 2001, the ORIGINAL PORTFOLIO shows dividends paid three times: On April 28, 2000 (0.371/share), July 31, 2000 (0.348/share) and October 31, 2000 (0.375/share). I can see that these records show the correct dates paid on the far-right side column, but it does not show all of the dividend payments during this span of time.
According to other data sources, dividends on SPY were paid FIVE TIMES (not three) during this period: On March 17, 2000 (0.371/share), June 16, 2000 (0.348/share), Sept. 15, 2000 (0.375/share), December 15, 2000 (0.411/share), and March 16, 2001 (0.316/share).
Furthermore, SIMULATION COPY shows dividends paid on the correct date, but NOT IN THE CORRECT AMOUNT! For example, the Simulation Copy shows the first dividend paid (March 17, 2000) was 0.37 per share times 684 shares = 253.63. However, doing this multiplication would result in a dividend payment equal to 253.08 - 55 cents less than what is shown in the records. Also, the correct amount according to multiple data sources is 0.371 per share (not 0.37). If we multiply 0.371×684 shares = 253.764 or $0.134 more than what the Simulation shows.
The second dividend paid in the Simulation Copy is off by even more! P123 shows a dividend for SPY on June 16, which is the correct date. However, P123 shows the amount to be 0.35 x 685 shares = $238.65. If we do this math, the number should be $239.75, a difference of $1.10. Even more confusing, the actual amount of the dividend paid to shareholders of SHY was 0.348/share (not (0.35/share). The actual dividend paid on 685 shares of SHY on June 16, 2000 should be $238.38, which is -27 cents less that what P123 shows.
Neither my P123 Original Portfolio nor the P123 Simulation Copy has the correct dividend amount for June 16.
If it were just a couple of dividends, I could overlook this issue. But unfortunately, its not.
EXAMINING MORE DIVIDENDS
On December 15, 2000 and March 16, 2001, my P123 Original Portfolio shows NO DIVIDEND AT ALL! The Simulation Copy shows a dividend on both these dates, BUT THEY ARE THE WRONG PRICE. For example, on March 16, 2001, P123 shows a dividend for SPY of $0.32 per 706 shares = 222.74. But if we do the multiplication, that number should be $225.92. P123 shorted me $3.18. (This was at the start of the portfolio, 17 years ago.)
You can see that Paul was right, these small transactions get progressively larger as the portfolio progresses in time and we are only 1/10th of the way into the portfolio’s time span.
However, documentation from other sources shows the ACTUAL dividend paid was $0.316 per share (or $223.096 in my case). Even though the calculation is closer than before, I would prefer it to be correct and not just close.
I went through many calculations of dividends and through the life of the portfolio and so far, I have yet to find one that is correct! The mis-payment of dividends affects the total shares the portfolio could own each time it makes a purchase and the effect of compounding magnifies all of those small errors into VERY BIG ERRORS.
The difference caused by all these dividend miscalculations had my ORIGINAL PORTFOLIO purchasing 3,290 shares of SPY at the end, while the SIMULATION COPY only owned 2,409 shares (27% fewer) and have a total return that is 27% less.
Chris