Investment Record-Keeping – Tips to Prevent Quicken From Making You Crazy

You’re the kind of person who prefers a hands-on approach to investments. You like to choose your own stocks, bonds and mutual funds. You like to do all of the record keeping yourself in the privacy of your own home.

For these reasons, you’ve chosen Intuit® Quicken as your investment software.

But, oops! You’ve discovered Quicken can make you crazy once your investments go beyond stocks, bonds and mutual funds.

Here are some tips to make your life easier:

Derivatives – Any security that derives its value from some underlying security is called a derivative. An option to buy stock is known as a “call,” whereas an option to sell stock is known as a “put,” and both of these are derivatives. Using Quicken, treat the purchase and later sale the same as you would the purchase or sale of a stock, noting the loss or gain. If you hold the option until it expires, you must record a Final Sale transaction, with the sales price as zero.

Exercising Puts and Calls – Under normal circumstances, you’d probably just sell the option back to the broker. However, if you end up exercising a “put” option, you must record the sale with a price of zero. To exercise a “call” option, you also record the price as zero.

Precious Metals and Commodities – When dealing in precious metals, gold coins, agricultural items and other commodities, you first must determine the unit of measurement. For example, gold is measured by weight according to the “troy ounce.” Agricultural commodities may be measured by the bushel or the ton. Each unit of measurement is akin to a share of stock. So, whether buying or selling, you must record the amount or volume of the sale by noting that it is, for example, 26 troy ounces of gold or 17 bushels of wheat (just as you would record the sale or purchase of 150 shares of stock).

Selling Puts and Calls – All you need to remember is that you record the purchase or sale as a regular transaction, regardless of whether the person to whom you sell the “put” then exercises the “put.”

Zero Coupon Bonds – Most bonds pay periodic interest. However, zero coupon bonds pay all of the interest in a lump sum when the bond matures. To keep track of the accruing value of the zero coupon bond (for personal information and for reporting interest earned), you note the annual interest that appears on the statement from your broker. The key is to enter the return of capital as a negative value. So, if you accrue $50 in interest on a zero coupon bond, you need to record a return capital transaction of -$50. This is necessary to show the associated cash account’s correct cash balance and the bond’s correct cost basis.

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