# How Book value of my portfolio is calculated?



## gibor365 (Apr 1, 2011)

Can anyone explain how Book value of my portfolio is calculated? It completely different from my contributions amount and it constantly changes...


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## liquidfinance (Jan 28, 2011)

Book value should be the current market value of the assets.

Sorry I was just thinking of the market value. Not the book value which should be the acb of your purchases. 

Only time I can see that should change is when you add to the holdings.


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## FrugalTrader (Oct 13, 2008)

Book value may change if you automatically reinvest your dividends.


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## AltaRed (Jun 8, 2009)

Book value is the aggregated cumulative value of all sums of money put into the investment, also known for CRA purposes as Adjusted Cost Base (ACB). In taxable accounts, ACB is a critical component of Capital Gains/Losses calculation when some, or all, of the investment is sold.


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## fatcat (Nov 11, 2009)

gibor, this is an incredibly helpful and completely free tool to maintain your cost base 
http://www.adjustedcostbase.ca/

you enter in your trading cost and it will autofill on all of your transactions and then just enter your buys and sells
you can download into excel

a great and useful tool that i use regularly


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## gibor365 (Apr 1, 2011)

The $ book value that I see on my discount brokerage account is from the time I bought stocks or YTD? The point that when I calculated all my buys , sells, new contributions and so on, I get completely different result from the Book value pablished


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## ChrisR (Jul 13, 2009)

gibor said:


> The $ book value that I see on my discount brokerage account is from the time I bought stocks or YTD? The point that when I calculated all my buys , sells, new contributions and so on, I get completely different result from the Book value pablished



Are you including the value of reinvested dividends?


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## james4beach (Nov 15, 2012)

I wonder if the brokers are consistent in how they implement that book value calculations.

If you're talking about an ETF... messy things happen to book value (ACB) when you get reinvested distributions and ROC. Also I believe you have to use the "final distribution characteristics" document as I ran into problems before where I used the simpler tax summary web pages. Final distribution characteristics (a PDF file) shows the month-by-month distributions, and you will need that information if you have any buy/sell transactions inside a year.

You will get the wrong result if you use the reinvested distribs and ROC lumped together for the year. You need the monthly breakdown.

A few months ago I checked iTrade's book value calculation for my XUT position, something that does spinoff ROC. iTrade matched what I calculated on my own, but only after the final distribution characteristics were released and enough time passed that iTrade was aware of them.


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## Eclectic12 (Oct 20, 2010)

gibor said:


> The $ book value that I see on my discount brokerage account is from the time I bought stocks or YTD?
> 
> The point that when I calculated all my buys , sells, new contributions and so on, I get completely different result from the Book value published


Sometimes ... sometimes not ... and other times it's just plain wrong. 

I have several stocks that showed up in my account due to buyouts by other companies, the book value is zero (which I interpret as they don't know as my ACB is positive). 


I guess the main question is are you unclear on how calculate the ACB (i.e. book value)?
Or are you confused as to why some of the broker's book values match and others don't?


Cheers


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## Jungle (Feb 17, 2010)

My broker had it wrong so don't count on them, but they can correct it for you after. I just use google finance.


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## AltaRed (Jun 8, 2009)

Jungle said:


> My broker had it wrong so don't count on them, but they can correct it for you after. I just use google finance.


It is true one cannot count on the broker to have correct book (ACB) values. The investor is responsible for these calculations and to maintain these records for each investment for as long as one holds the investment. Some brokers do not include ROC in their adjustments. Further, if you own the same investment in two separate brokerage taxable accounts, the ACB for the investment is the sum of both investments. Each of the two brokers cannot possibly know you have the same investment elsewhere.

For myself, I use Quicken to record all of my investments, including ACB values, asset allocation, etc. It is the only way for me to have a relatively easy-to-manage grand picture of a TFSA, RRSP and 2 taxable brokerage accounts.


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## gibor365 (Apr 1, 2011)

Eclectic12 said:


> I guess the main question is are you unclear on how calculate the ACB (i.e. book value)?
> Or are you confused as to why some of the broker's book values match and others don't?
> 
> 
> Cheers


I (and my wife) have 6 different accounts, 2 RRSP, 2 LIRA, 2 TFSA ... We don't have cash account, so i don't really care about taxes... 
I'm mostrly confused regarding my gains/losses on different account... I have Excel spreadsheet where I know exactly what is my "Book Value" (from opening account and for every specific year). I just add new contribution and compare it with market value. So, I consider it like "real" gain/loss ... but when I look at BV on discount brokerage sites, I have completely different numbers....
Even if I don't contribute anything at all, like in my LIRA:
I opened account in begining of 2011 and had 14,339
End of 2011 I had 12,969
End of 2013 - 15,223
current value - 16,780
So, my understanding that BV should be 14,339

But BV on Investor Edge now shows: 15,689 and 3 months ago it showed 15,365... so difference in 3 months is $324 , yes, I received dividends but in those 3 months period, I got only $189.8 in dividends... why is this difference?


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## liquidfinance (Jan 28, 2011)

gibor said:


> I (and my wife) have 6 different accounts, 2 RRSP, 2 LIRA, 2 TFSA ... We don't have cash account, so i don't really care about taxes...
> I'm mostrly confused regarding my gains/losses on different account... I have Excel spreadsheet where I know exactly what is my "Book Value" (from opening account and for every specific year). I just add new contribution and compare it with market value. So, I consider it like "real" gain/loss ... but when I look at BV on discount brokerage sites, I have completely different numbers....


Do you DRIP dividends? If you are just adding what you pay into the account as your cost base then you will be getting a different figure. 

The DRIP will adjust the cost base of the specific equity.


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## fatcat (Nov 11, 2009)

adjustedcostbase.ca is preset to handle:

return of capital
capital gains dividend
re-invested dividend
re-invested capital gains distribution
splits

as well as buying selling options

you should enter all your changes to the acb and it should always override whatever your broker comes up with (imo)
at least TDW allows the acb to be adjusted by the account holder so they recognize that it is your responsibility


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## gibor365 (Apr 1, 2011)

liquidfinance said:


> Do you DRIP dividends? If you are just adding what you pay into the account as your cost base then you will be getting a different figure.
> 
> The DRIP will adjust the cost base of the specific equity.


I have just 2 stocks on this account, I drip only one (RY), and I dripped just 1 share! It cannot result in so big difference... imho this BV is complete BS


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## Eclectic12 (Oct 20, 2010)

gibor said:


> I (and my wife) have 6 different accounts, 2 RRSP, 2 LIRA, 2 TFSA ... We don't have cash account, so i don't really care about taxes...
> 
> I'm mostrly confused regarding my gains/losses on different account...


That makes is clearer.




gibor said:


> ... I have Excel spreadsheet where I know exactly what is my "Book Value" (from opening account and for every specific year). I just add new contribution and compare it with market value. So, I consider it like "real" gain/loss ... but when I look at BV on discount brokerage sites, I have completely different numbers....


It sounds like your version of BV is really contributions, where what I see in my RRSP statements from my broker, is the investment BV. 

To illustrate how they could vary, let's look at $5K, put into an RRSP that buys an investment trust for $10 a unit with a commission of $10. Say the trust pays $2 a year per unit with 80% being Return of Capital (RoC) and 20% income.

The $5K will buy 499 units ($5K - $10 / $10) and will pay $998 to the RRSP in the first year.


Using what I think your method is (feel free to correct any mistakes), the BV will be $5K.

Since the broker is taking RoC into account (at least mine is), at the start - their BV will match ( 499 units x $10 + $10 = $5K).
At the end of the year, their BV will have changed as the RoC portion of the cash payments is subtracted from the BV. With 90% being RoC, then $798.40 (.80 * $998) will be subtracted from the BV, making $4201.60 their end of year BV.

So the difference is $798.40, between the BVs and that's in a single year. 
Sure, there are no tax consequences but I suspect most brokers find it easier to run the same calculations for their BVs in a registered account as in a taxable account.

Other sources of adjustments for the BV include re-invested dividends/cash distrubutions, new purchases with fresh contributions (likely not at the same price) and outright errors. Note that the re-investments can be tricky depending on the investment structure/payment.

For example, a capital gain distribution that is re-invested where no additional shares/units are issued or created is more likely to be reported by an MF compared to an ETF.
http://canadianfinancialdiy.blogspot.ca/2007/03/adjusted-cost-base-for-etfs-and-mutual.html
http://howtoinvestonline.blogspot.ca/2009/01/etfs-and-mutual-funds-calculating.html

While the tax aspect won't apply to you, I suspect the brokers BV might be different for the MF.




gibor said:


> Even if I don't contribute anything at all, like in my LIRA:
> I opened account in begining of 2011 and had 14,339 ...
> So, my understanding that BV should be 14,339


My understanding based on the monthly statements in my RRSP from my broker is that the BV is only going to be the same if there are no events that change the Adjusted Cost Base (ACB). This means no re-investment or new purchases, no RoC etc.




gibor said:


> ... But BV on Investor Edge now shows: 15,689 and 3 months ago it showed 15,365... so difference in 3 months is $324 , yes, I received dividends but in those 3 months period, I got only $189.8 in dividends... why is this difference?


If I'm reading this correctly (was wrong on first pass :rolleyes2: ), the BV is rising so there some sort of re-investment going on.

As I understand it, the dividends will increase the value in the account but won't change the brokers or your BV. The challenge is that a lot of people will think a dividend was paid but don't realise it was a re-invested capital gain or a cash distribution that included something that changed the BV (or as it is more commonly known, ACB).


Thought, more details would help clarify, especially the breakdown of the money paid by the investment (was it RoC? were the dividends buying more units/stock?).


Cheers


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## Eclectic12 (Oct 20, 2010)

gibor said:


> I have just 2 stocks on this account, I drip only one (RY), and I dripped just 1 share!
> 
> It cannot result in so big difference...


For one year and one share ... correct. 

The broker BV though is likely using *all* shares purchased for both DRIPs as well as any cash purchases. So depending on the total time frame as well as the transactions in that time frame, it could be significant.




gibor said:


> ... imho this BV is complete BS


It's certainly not the tool for what is attempting to be figured out.


Cheers


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