[kmymoney] [Bug 396301] Investment Performance by Account YTD Return on Investment result different between version 4.8 and 5.01

[Jon]

https://bugs.kde.org/show_bug.cgi?id=396301

--- Comment #4 from Jon <CloudDriver46 at gmail.com> ---
To answer you question, the 3.5 shares not sold are the $350 in the Ending
Balance.

I reviewed the information on ROI calculation in the Investopedia link you
provided.  As an investor, I have used this calculation many times.  KMyMoney
does not have the functionality to correctly make this ROI calculation. 
KmyMoney Handbook has the following statement about ROI in the Investment
section:

“Unimplemented Features
There are some features that are normally associated with investments which are
not yet implemented in KMyMoney. These include, but are not limited to
derivatives, options, and futures. In addition, when you sell a security,
KMyMoney does not know which specific shares you are selling, i.e., the oldest
or the most recently purchased, so it cannot calculate return on investment.
Finally, it has no direct knowledge about any country's specific tax reporting
requirements, but these can usually be handled by marking as Tax related all
the categories you use for transactions which might have tax consequences.”

After reading this, I was curious how KMyMoney was able to do the ROI
calculation for the Investment Capital Gains reports.  I created another 
KMyMoney file with one investment account and put in several Buy and Sell
transactions using made up numbers to see if I could figure out how the program
was determining the buy value for each time shares were sold.  It appears that
the program is using a First In/First Out method (first shares bought are the
first shares sold).  Lacking the ability to identify the specific shares sold,
this a reasonable but not accurate way to estimate capital gains.  The gain is
accurate only for the situation where the report date range includes all of the
transaction dates and also all shares have been sold.

The KMyMoney file I created included only Buy transactions for 2021.  For 2022
I included one Buy transactions and two Sell transactions that sold all shares.
 Total Buy value for 2021 was $1295 and another $210 for 2022, for a grand
total of $1505.  The total Sell value was $1340.  The ROI calculation is
therefore ($1340 – $1505) / $1505 = a 10.96% loss.  The Capital Gains report in
KMyMoney matches this result.  When I ran the Investment Performance report
with a date range of All Dates, I see Beginning Balance $0, Buy Value $1505,
Sell Value $1340, Ending Balance $0 and ROI of 10.96% loss, matching the
Capital Gains report.  However, a different result happens when I use the
default report date range of Year to Date.  In that case I see Beginning
Balance of $1500, Buy Value $210, Sell Value $1340,  Ending Balance $0 and ROI
of 21.64% loss.  Since all shares that were bought were sold, this is obviously
an incorrect result.  The problem is that the shares bought in 2021 had an
increase in share price by the end of the year bringing the ending value of the
shares to $1500. The Beginning Balance for 2022 should have been the ending Buy
Value for 2021 of $1295, not the Investment Value based on the year end share
price.

There are two types of investment gains.  When shares are sold we have
“realized” gains as above.  If not all shares are sold we also have
“unrealized” gains.  Unrealized gains are calculated as the increase or
decrease in share value based on the current share price minus the buy value of
the shares.  Unrealized gains vary from day to day as share prices change due
to market activity.  Unrealized gains are part of the performance of an
investment.  The Investment Performance report does not use the unrealized gain
value as the Ending Balance.  Instead, it uses the full value of the shares at
the ending price.  This is wrong. The report calculates the ROI by adding the
Ending Balance to the Sell Value.  The Ending Balance needs to be the
unrealized gain amount, not the ending shares value.  A better title for Ending
Balance would be Unrealized Gain/Loss.

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