How is the investment gain/loss computed?

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21

Hey Neil

I couldnā€™t figure it out to the penny but I think itā€™s to do with the oldest shares being ā€˜soldā€™ when you sold some off in May

Because those were more expensive I guess freetrade saw that as selling for a loss at that time

If you take those out of the calculation the remaining shares would look like:

Screenshot_20200617-001934_Sheets
Screenshot_20200617-001934_Sheets777Ɨ695 126 KB

Also looks like stamp duty isnā€™t included in the calculation of profit

I guess this is one of those things where thereā€™s no ā€˜rightā€™ way to work out profit if some but not all shares have been sold :man_shrugging:

22

I guess whichever way thd taxman calculates profit will be the best way to show it so long as you have the historic profit/loss calculation for part sales for easy identification later on. I know better statements will be one thing in the future for freetrade to look for

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23

What is concerning is that if people are relying on the profit/loss figure in FreeTrade then using my calculations this figure is WRONG.

Many first time users of FreeTrade might be buying and selling a number of shares and then using this figure to say oh great Iā€™ve made 10% profit now on this stock Iā€™m going to sell the entire holding when in fact the figure is not 10%.

Would be very useful if someone from FreeTrade can reply to this thread and advise.

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24

It would be helpful to have an example calculation from free trade especially including selling multiple shares. Anyone asked on the chat?

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25

Just looking into this a bit further. If I were to sell my holding now with the share price of Ā£3.28 Iā€™d get back Ā£330.88

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FreeTrade is showing my investment is up +5.04% (around Ā£15.87 profit)

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IMG_19131750Ɨ1334 77 KB

Yet my manual calculations show just Ā£9.93 profit

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I can now see where FreeTrade is getting the +5.04% (around Ā£15.87 profit). They are using my average price per share Ā£3.1158. So the current cost to buy the shares using the avg. price per share is Ā£314.70 and if I sold at the current share price Iā€™d get back Ā£330.88 giving a profit of Ā£16.18.

image

But in reality, my overall profit should I sell this holding would be Ā£9.93 based on my manual calculation. Like I have mentioned before this Investment gain/loss is misleading and not correct, or am I wrong - please can someone from FreeTrade clarify this ASAP as Iā€™m pretty sure Iā€™m not the only person using the Investment gain/loss figure.

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26

That makes sense, the average price per share is also based on the remaining shares, after selling the older most expensive shares. So the current average is lower than the overall average of all buys

I think any way of calculating the remaining profit is open to interpretation. For example of you only had 1 share left it wouldnā€™t make sense (to me) to show the total profit on all shares previously bought/sold

27

The issue is the gain/loss is misleading. I ā€œwasā€ using this figure as a indication of my current position, selling for a Ā£15.87 gain where the true overall gain for this holding is just Ā£9.93.

How do other people keep track of such figures?

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28

Because of this thread, I checked the figures of one of my own shares.

If I sold my shares I would get back Ā£786.90 (15 shares at Ā£52.46/share)

According to the gain/loss, it would be +70.49.

My total buys (no sells) amounts to Ā£720.30. Now that plus the supposed gain does not equal what I would actually get back

720.30 + 70.49 = 790.79

Just noticed the gain loss just went up but the sell share price didnā€™t.

29

Any dividends received for this stock, because I think that is included in any gainā€¦

30

Nope, no dividends

31

So actually your profit isnā€™t Ā£70.49 but Ā£786.90 minus Ā£720.30 giving Ā£66.60 (give or take a few pence depending on the sell price at the time)

32

I am not actually sure it is, had a look at one I got a recent dividend for and it isnā€™t included

33

Is it because itā€™s excluding your sells on the 18th May? E.g. calculated from currently owned shares only?

34

Over the last few months, Iā€™ve made a series of buys in HVPE and actioned one sale.

If I look at total money into HVPE and total out if the remaining holding of 138 shares was sold today, I get a return on HVPE of 4.27% as below:
Absolute

One secā€¦ only one image allowed for this first postā€¦

35

I can also replicate FTā€™s 18.79% in-app ā€˜Investment Gain/Lossā€™ figure if I take the single sale of 65 to mean that the first 65 I bought were sold by removing the first buys of 33 and 14 and recalculating only a 14 share buy for 04 Feb (thus removing a further 18 buy equalling 65 removed) at the correctly adjusted average cost per share, 588.17/32) x 14 = 257.32.
The 65 sell side is then ignored for the return calculation.
FT

So depending on how you look at things, you get a very different impression.

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36

So actually if you sold now, your ROI would be 4.27% but FreeTrade is showing you the return is 18.79% ?

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37

Exactly!
FT is showing the current performance of only the remaining 138 position, not the ROI as at today.

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38

For me, this figure is wrong and needs to be addressed. A newbie investor might see an 18% gain like your example and ā€˜assumeā€™ that this is their overall position for this stock when sold when actually it is only 4.27%.

Whatā€™s worst some entire holdings might have been sold out at a loss not realising.

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39

I agree itā€™s a bit messy but not sure thereā€™s a clear way gain/loss can be shown by just one number when thereā€™s been multiple buys/sells

I think the only way to show it clearly would be a breakdown of all transactions to show the total gain/loss for that stock. That would include any gain/loss thatā€™s been ā€˜locked inā€™ by previous sells

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40

Out of interest how do other platforms deal with this ?

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