Improve investment advice on hledger.org
- Added examplary stock sale to demonstrate how capital gain can be taken into account. - Made value tracking and cost basis caveats more explicit. - Added links for further reading.
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Matthias Kauer
Simon Michael
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@ -1,9 +1,20 @@
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# Track investments
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A simple example using [prices](/journal.html#prices):
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Hledger can be used to track stock investments.
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In fact, the double-entry accounting is flexible enough to support most constellations you will come across.
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However, you may find that some transactions could be better supported.
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Caveats are:
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- hledger does not validate the cost basis during a sale.
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- historical mark-to-market performance is not supported
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(but the market value at one instant, like today, can be calculated)
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## Example
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### Buying a stock
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Let's go over a simple example using [prices](/journal.html#prices):
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```journal
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2017/1/1 opening balances
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2017/1/1 opening balance
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(assets:depot) $3000
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2017/1/2 buy shares at $200
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@ -11,54 +22,124 @@ A simple example using [prices](/journal.html#prices):
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assets:shares 10 TSLA @ $200 ; transaction/purchase price
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assets:depot
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; market price, has jumped since yesterday's purchase!
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P 2017/1/3 TSLA $250
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```
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Some reports.
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We start with $3000.
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After the 1/2 purchase, we have $1000 remaining and 10 TSLA shares:
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```shell
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$ hledger -f t.j bal assets --flat -HD
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$ hledger -f t.j bal --flat -HD
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Ending balances (historical) in 2017/01/01-2017/01/02:
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|| 2017/01/01 2017/01/02
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|| 2017/01/01 2017/01/02
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===============++============================
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assets:depot || $3000 $1000
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assets:shares || 0 10 TSLA
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assets:depot || $3000 $1000
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assets:shares || 0 10 TSLA
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---------------++----------------------------
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|| $3000 $1000, 10 TSLA
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|| $3000 $1000, 10 TSLA
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```
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Show the shares's value at cost, with [`-B/--cost`](/hledger.html#reporting-options):
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Show the shares' value at cost, with [`-B/--cost`](/hledger.html#reporting-options):
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```shell
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$ hledger -f t.j bal assets --flat -HD -B
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$ hledger -f t.j bal --flat -HD -B
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Ending balances (historical) in 2017/01/01-2017/01/02:
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|| 2017/01/01 2017/01/02
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|| 2017/01/01 2017/01/02
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===============++=========================
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assets:depot || $3000 $1000
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assets:shares || 0 $2000
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assets:depot || $3000 $1000
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assets:shares || 0 $2000
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---------------++-------------------------
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|| $3000 $3000
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|| $3000 $3000
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```
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Show the shares's value using the latest applicable market price,
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## Value reporting
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Add the following to the journal file.
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```journal
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; market price, has jumped since yesterday's purchase!
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P 2017/1/3 TSLA $250
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```
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Show the shares's value using the latest applicable market price,
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with [`-V/--value`](/hledger.html#market-value).
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A $500 capital gain is apparent in the totals:
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```shell
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$ hledger -f t.j bal assets --flat -HD -V
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$ hledger -f t.j bal --flat -HD -V
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Ending balances (historical) in 2017/01/01-2017/01/02:
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|| 2017/01/01 2017/01/02
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|| 2017/01/01 2017/01/02
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===============++=========================
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assets:depot || $3000 $1000
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assets:shares || 0 $2500
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assets:depot || $3000 $1000
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assets:shares || 0 $2500
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---------------++-------------------------
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|| $3000 $3500
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|| $3000 $3500
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```
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This is about the limit of hledger's
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[value-reporting](https://github.com/simonmichael/hledger/issues/131)
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[abilities](https://github.com/simonmichael/hledger/issues/329),
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currently.
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There are still limitations in the value reporting that hledger can currently do.
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More information can be found in [Github issue #131](https://github.com/simonmichael/hledger/issues/131) and [Github issue #329](https://github.com/simonmichael/hledger/issues/329).
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You may want to investigate the output after adding more prices to the journal file.
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```journal
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P 2017/1/1 TSLA $210
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P 2017/1/4 TSLA $250
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P 2017/1/8 TSLA $270
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```
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### Selling a stock and tracking capital gains
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At some point you will probably sell shares.
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It may seem intuitive to model such a sale as follows.
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```journal
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2017/1/4 sell shares at $250 ; NOTE: You probably want to model capital gains too; see below
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assets:shares -10 TSLA @ $250 ; sell price
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assets:depot
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```
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This leads to the following evolution
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```shell
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hledger -f t.j balance --flat -HD -B
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Ending balances (historical) in 2017/01/01-2017/01/04:
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|| 2017/01/01 2017/01/02 2017/01/03 2017/01/04
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===============++=================================================
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assets:depot || $3000 $1000 $1000 $3500
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assets:shares || 0 $2000 $2000 $-500
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---------------++-------------------------------------------------
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|| $3000 $3000 $3000 $3000
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```
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You end up with the correct amount in your depot.
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At some point, however, you will have to report the capital gain that you realized with your sale.
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This gain currently "sits" in `assets:shares` and has to be entered manually to be recognized.
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Let's report our sale in a different way.
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```journal
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2017/1/4 sell shares at $250
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assets:shares -10 TSLA @ $200 ; cost basis (must be tracked by user!)
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assets:depot $2500 ; cash proceeds
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revenue:capital_gains ; deduce profit
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```
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Now, the new $500 are no longer stuck in the shares account.
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```shell
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hledger -f t.j bal --flat -HD -B
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Ending balances (historical) in 2017/01/01-2017/01/04:
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|| 2017/01/01 2017/01/02 2017/01/03 2017/01/04
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=======================++=================================================
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assets:depot || $3000 $1000 $1000 $3500
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assets:shares || 0 $2000 $2000 0
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revenue:capital_gains || 0 0 0 $-500
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-----------------------++-------------------------------------------------
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|| $3000 $3000 $3000 $3000
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```
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## Further reading
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- Beancount guides (general double-entry accounting advice from another tool)
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- [Cookbook][beancount_cookbook]: Account naming, basic trading transactions
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- [Trading guide][beancount_trading]: More complicated trading transactions, discussion on tricky cost basis adjustments
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- [Github #624 on investment tracking](https://github.com/simonmichael/hledger/issues/624)
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- [Discussion on investment modeling from the mailing list](https://groups.google.com/forum/#!topic/hledger/e8Ss7ZL4ADI)
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[beancount_cookbook]: http://furius.ca/beancount/doc/cookbook
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[beancount_trading]: http://furius.ca/beancount/doc/trading
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