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Unitising portfolio impossible due to timing of information?

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stacker512
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Unitising portfolio impossible due to timing of information?

#452329

Postby stacker512 » October 22nd, 2021, 5:59 pm

Hi all,

So the thread https://lemonfool.co.uk/viewtopic.php?f=15&t=28540 says:

For each time that the portfolio received a dividend, the date, the cash value of the dividend and the value of the portfolio just before the dividend appeared.


How are you supposed to know the portfolio value just before the dividend arrived if the portfolio is made of varying price investments that change every minute / second, and you have no idea what the precise time of the dividend received will be?

Seems one would always have slightly incorrect values to use for the unitisation.
I know I'm struggling so far to construct a spreadsheet that I can keep the unitisation data - by the time I place a buy, I had forgotten to take note of the portfolio value. And I would think doing this with dividends would become harder than useful. Or am I just inexperienced and need to come to a better workflow for myself?

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Re: Unitising portfolio impossible due to timing of information?

#452344

Postby monabri » October 22nd, 2021, 7:26 pm

I'll hazard a reply.

Perhaps just be consistent as to how you calculate unit values. What is important is how much the unitised values increase over time.

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Re: Unitising portfolio impossible due to timing of information?

#452345

Postby scrumpyjack » October 22nd, 2021, 7:32 pm

Surely you use the XD date not the payment date.

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Re: Unitising portfolio impossible due to timing of information?

#452348

Postby monabri » October 22nd, 2021, 7:45 pm

scrumpyjack wrote:Surely you use the XD date not the payment date.



I only change modify the number of units ( add or cancel) when cash is added/withdrawn. I record divis on the XD date and modify the XIRR calculation by addition of the divi to each share or IT.

I realise that declared divis can still be retracted and not paid!

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Re: Unitising portfolio impossible due to timing of information?

#452350

Postby scrumpyjack » October 22nd, 2021, 7:52 pm

monabri wrote:
scrumpyjack wrote:Surely you use the XD date not the payment date.



I only change modify the number of units ( add or cancel) when cash is added/withdrawn. I record divis on the XD date and modify the XIRR calculation by addition of the divi to each share or IT.

I realise that declared divis can still be retracted and not paid!


Yes that does happen very very infrequently, but basing your cash adjustment on the xd date will in the overwhelming majority of cases reflect reality better than basing it on the date the dividend is paid.

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Re: Unitising portfolio impossible due to timing of information?

#452367

Postby nmdhqbc » October 22nd, 2021, 8:58 pm

stacker512 wrote:Hi all,

So the thread https://lemonfool.co.uk/viewtopic.php?f=15&t=28540 says:

For each time that the portfolio received a dividend, the date, the cash value of the dividend and the value of the portfolio just before the dividend appeared.


How are you supposed to know the portfolio value just before the dividend arrived if the portfolio is made of varying price investments that change every minute / second, and you have no idea what the precise time of the dividend received will be?

Seems one would always have slightly incorrect values to use for the unitisation.
I know I'm struggling so far to construct a spreadsheet that I can keep the unitisation data - by the time I place a buy, I had forgotten to take note of the portfolio value. And I would think doing this with dividends would become harder than useful. Or am I just inexperienced and need to come to a better workflow for myself?


i don't think you need to update every time a dividend is paid. we're essentially mimicking what open ended funds do. they mostly sweep up the dividends 4 or 2 times a year and pay them out for the income units and record the amount for the acc units. I do the same but on the last day of each month once the market has closed. there is no doubt some slight inaccuracies with using pay day instead of the more accurate x dividend date but it comes out in the wash in later valuations anyway so i don't bother putting that extra effort in to work out which investments are x-divi.

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Re: Unitising portfolio impossible due to timing of information?

#452372

Postby tjh290633 » October 22nd, 2021, 9:17 pm

My method is to do it monthly, rolling up the cash in the unit value until it is reinvested or withdrawn. I use the unit value before reinvestment to calculate the number of new units "bought".

Effectively my unit goes XD once per month.

If you do it when shares go XD, you do not have the money to reinvest. You can only do it when you have received the dividends.

TJH

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Re: Unitising portfolio impossible due to timing of information?

#452423

Postby stacker512 » October 23rd, 2021, 9:24 am

nmdhqbc wrote:
stacker512 wrote:i don't think you need to update every time a dividend is paid. we're essentially mimicking what open ended funds do. they mostly sweep up the dividends 4 or 2 times a year and pay them out for the income units and record the amount for the acc units. I do the same but on the last day of each month once the market has closed. there is no doubt some slight inaccuracies with using pay day instead of the more accurate x dividend date but it comes out in the wash in later valuations anyway so i don't bother putting that extra effort in to work out which investments are x-divi.


(Emphasis mine)

I think if I record the portfolio value after market close, the day previous the dividends it might work. Then I'd only have to deal (or not) with any price fluctuations on market open the following day before the dividends are received. Perhaps it doesn't matter so much?

I've re-jigged the spreadsheet to follow more closely the Unitisation sticky thread example, so will see how I get on with it. Next dividend payout day for me is 19th November.

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Re: Unitising portfolio impossible due to timing of information?

#452426

Postby nmdhqbc » October 23rd, 2021, 9:36 am

stacker512 wrote:
nmdhqbc wrote:
stacker512 wrote:i don't think you need to update every time a dividend is paid. we're essentially mimicking what open ended funds do. they mostly sweep up the dividends 4 or 2 times a year and pay them out for the income units and record the amount for the acc units. I do the same but on the last day of each month once the market has closed. there is no doubt some slight inaccuracies with using pay day instead of the more accurate x dividend date but it comes out in the wash in later valuations anyway so i don't bother putting that extra effort in to work out which investments are x-divi.


(Emphasis mine)

I think if I record the portfolio value after market close, the day previous the dividends it might work. Then I'd only have to deal (or not) with any price fluctuations on market open the following day before the dividends are received. Perhaps it doesn't matter so much?

I've re-jigged the spreadsheet to follow more closely the Unitisation sticky thread example, so will see how I get on with it. Next dividend payout day for me is 19th November.


i think perhaps you've misunderstood me. my suggestion (and what i do) is to not concern yourself with valuing the portfolio and paying out the dividends each time one comes in. just let the cash build inside the portfolio and pay them out (or have them re-purchase new units) at set intervals. it becomes too much work and not worth the effort other wise. for me anyway.

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Re: Unitising portfolio impossible due to timing of information?

#452444

Postby Newroad » October 23rd, 2021, 10:35 am

Hi Stacker512.

Here's my take ...

    I only do accumulation units
    Sometimes, I only measure the unit price (usually close of business, last day of month) without buying/selling - Case (1)
    Sometimes, I measure the unit price after buying or selling (usually close of business, 3rd Wednesday of the month, II's regular investment day - but I would so the same at the end of the day for any ad-hoc purchase/sale when investing new funds or drawing funds down) - Case (2)
    In case (1), I only enter the value of the portfolio, which gives a new unit price - unit numbers are constant
    In case (2), I enter both the value of the portfolio (A) and the (usually) added investment in £'s (B). I subtract B from A and divide by the existing number of units to get the unit price, then add the number of units implied by the investment B - i.e. unit numbers change as well as unit price

Both case (1) and case (2) simply wrap up dividends, distributions, tax relief etc since the last measurement and these are not construed as adding units. The only time I add (or subtract) units is when I invest (or drawdown) additional funds.

It is trivial to do now and quite useful. The only real tracking error, IMO, is if there is a big move between the purchase during the day and the measurement at the end of the day. If this bothers you, you would simply need to get the portfolio value just before purchase (trivial for me with II, though maybe 15 mins delayed).

Regards, Newroad

PS Happy to upload a spreadsheet (not just a table, but one with formulae) if allowed and if it would help anyone - if someone could tell me how?

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Re: Unitising portfolio impossible due to timing of information?

#452487

Postby doug2500 » October 23rd, 2021, 12:50 pm

I'm not HYP but I unitise my portfolio so this might be useful to someone.

I only do acc units, income looks too much work for what I need.
I only have to do calculations when I move cash in or out of portfolio, changing cash within the portfolio to investment makes no difference and does not need any calculation.
I choose to do it quarterly for fun!
I have a dedicated bank account that dividends are paid into which is included in my spreadsheet. This is key in minimising work as individual dividends make no difference, only the bank balance at time of calculation.

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Re: Unitising portfolio impossible due to timing of information?

#452534

Postby JohnnyCyclops » October 23rd, 2021, 7:12 pm

There are (at least!) two types of unitisation.

As applied to a personal portfolio, like HYP:

Accumulation - only track monies added to or removed from the portfolio. "Monies added" does not include dividends received
Income - track the purchases, sales, dividends and corporate events that impact cash (e.g. return of capital).

I do the ACC version. I thought I was doing an INC version, but completely missed the dividends, and now receiving c. 70-80 dividends a year it's too much of a phaff to follow-up.

On the ACC units, I check the portfolio value on the close of business the day before we add new funds (not removed any, so far, as we're HYP building). The portfolio value is the invested stocks PLUS cash sitting in the ISAs that are 'attached' to the HYP, e.g. dividends awaiting reinvestment (one ISA has some non-HYP investments that generate dividends/cash).

I think an INC unitisation is a "make work" activity, unless one has some sort of daily (ideally automated) valuation of the portfolio. The HYPTUSS provides a valuation but does require both maintain and opening/running.

I wouldn't overly worry about in-day trading movements of the portfolio. At what point in the day might you consider the dividend is actually paid? The start of trading? The time-stamp your broker adds it to your cash balance? It's an interesting point others make about the XD date, but as I do ACC not INC it's a moot for unitisation purposes.

I (previously!) did quarterly checkpoints of the HYP for the units, measuring it's then value. We've not added new funds since 2018, so the number of units remains unchanged in recent years. I hope to get back in the swing of quarterly checkpoints.

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Re: Unitising portfolio impossible due to timing of information?

#452603

Postby Hypster » October 24th, 2021, 8:20 am

stacker512 wrote:How are you supposed to know the portfolio value just before the dividend arrived


Your reference to prices changing by the second suggests you are taking the "just before the dividend appeared" instruction too literally. Just take the portfolio value using the closing prices of the night before. When I first unitised, I created a spreadsheet that pulled in the closing price for each of my holdings on any given date. However, now I track my portfolio in Stockopedia and if ever I forget about a dividend its very easy to scroll back over the valuation chart. Either way, once you're up and running, monitor your holdings as to when they announce their dividends and make a note of the relevant dates (you can track these in spreadsheet or pop a scheduled transaction in your money manager app (Microsoft Money, YNAB, etc).

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Re: Unitising portfolio impossible due to timing of information?

#452604

Postby funduffer » October 24th, 2021, 8:55 am

JohnnyCyclops wrote:There are (at least!) two types of unitisation.

As applied to a personal portfolio, like HYP:

Accumulation - only track monies added to or removed from the portfolio. "Monies added" does not include dividends received
Income - track the purchases, sales, dividends and corporate events that impact cash (e.g. return of capital).

I do the ACC version. I thought I was doing an INC version, but completely missed the dividends, and now receiving c. 70-80 dividends a year it's too much of a phaff to follow-up.

On the ACC units, I check the portfolio value on the close of business the day before we add new funds (not removed any, so far, as we're HYP building). The portfolio value is the invested stocks PLUS cash sitting in the ISAs that are 'attached' to the HYP, e.g. dividends awaiting reinvestment (one ISA has some non-HYP investments that generate dividends/cash).

I think an INC unitisation is a "make work" activity, unless one has some sort of daily (ideally automated) valuation of the portfolio. The HYPTUSS provides a valuation but does require both maintain and opening/running.

I wouldn't overly worry about in-day trading movements of the portfolio. At what point in the day might you consider the dividend is actually paid? The start of trading? The time-stamp your broker adds it to your cash balance? It's an interesting point others make about the XD date, but as I do ACC not INC it's a moot for unitisation purposes.

I (previously!) did quarterly checkpoints of the HYP for the units, measuring it's then value. We've not added new funds since 2018, so the number of units remains unchanged in recent years. I hope to get back in the swing of quarterly checkpoints.


I am not sure this is correct.

I do INC unitisation for my HYP. I only need to calculate the value of my HYP, when I sell or purchase some shares, which will in effect change the number of units. (I also calculate the portfolio value once a month for my own purposes, but this is just for my records and is not necessary to keep your unitisation up to date).

Dividends are assumed to be withdrawn from the portfolio as income on the day they are paid, so they do not change the number of units, nor the value of the portfolio. If I choose to re-invest those dividends, or any new cash, then I would get a HYP valuation on HYPTUSS just before I execute the trade. Similarly if I were to sell something from the HYP. Then I would use this valuation to calculate a unit price and then work out the change in the number of units from the sale or purchase. Any cash from dividends or elsewhere that is waiting to be spent or re-invested is assumed to be outside the portfolio.

If you only top-up/sell infrequently as I do, then there is very little effort in maintaining INC unitisation.

FD

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Re: Unitising portfolio impossible due to timing of information?

#452629

Postby JohnnyCyclops » October 24th, 2021, 11:09 am

funduffer wrote:I am not sure this is correct.

I do INC unitisation for my HYP. I only need to calculate the value of my HYP, when I sell or purchase some shares, which will in effect change the number of units. (I also calculate the portfolio value once a month for my own purposes, but this is just for my records and is not necessary to keep your unitisation up to date).

Dividends are assumed to be withdrawn from the portfolio as income on the day they are paid, so they do not change the number of units, nor the value of the portfolio. If I choose to re-invest those dividends, or any new cash, then I would get a HYP valuation on HYPTUSS just before I execute the trade. Similarly if I were to sell something from the HYP. Then I would use this valuation to calculate a unit price and then work out the change in the number of units from the sale or purchase. Any cash from dividends or elsewhere that is waiting to be spent or re-invested is assumed to be outside the portfolio.

If you only top-up/sell infrequently as I do, then there is very little effort in maintaining INC unitisation.

FD


That sounds like what I called 'accumulation' units. Either way, so long as the individual investor feels they are tracking something that's of use to them.

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Re: Unitising portfolio impossible due to timing of information?

#452743

Postby csearle » October 24th, 2021, 6:34 pm

I only ever need to think about my unitisation when I add to or remove from (never happened yet) my portfolio. So accrued dividends are still considered to be within the portfolio so generate no action. In practice this means a portfolio valuation at the point of adding £20000 once per year (when I'm able to use my ISA allowance).

I have been calling these accumulation units. Almost no work involved at all especially as I've contrived an Excel macro (plus activation button) to semi-automate the procedure.

Chris

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Re: Unitising portfolio impossible due to timing of information?

#452850

Postby Arborbridge » October 25th, 2021, 10:13 am

funduffer wrote:
I do INC unitisation for my HYP. I only need to calculate the value of my HYP, when I sell or purchase some shares, which will in effect change the number of units. (I also calculate the portfolio value once a month for my own purposes, but this is just for my records and is not necessary to keep your unitisation up to date).

Dividends are assumed to be withdrawn from the portfolio as income on the day they are paid, so they do not change the number of units, nor the value of the portfolio. If I choose to re-invest those dividends, or any new cash, then I would get a HYP valuation on HYPTUSS just before I execute the trade. Similarly if I were to sell something from the HYP. Then I would use this valuation to calculate a unit price and then work out the change in the number of units from the sale or purchase. Any cash from dividends or elsewhere that is waiting to be spent or re-invested is assumed to be outside the portfolio.

If you only top-up/sell infrequently as I do, then there is very little effort in maintaining INC unitisation.

FD


I only need to calculate the value of my HYP, when I sell or purchase some shares, which will in effect change the number of units.

Same here, I assume all dividends are withdrawn so there is no need to alter the number of units when dividends come in. The unit price alters with the company share price change, not with the dividend flow. This is what I understand by "income units" - all income is removed. If some of that income is later used to buy new shares, clearly this creates new units at the price ruling on the day (either at the time of transaction or close to it - it makes little difference in practice). Similarly if shares are sold, units are "surrendered" at the price on the day.

If income were retained (eventually to be reinvested, one assumes) these would be accumulation units - because as the name suggested they "accumulate" the income. This does not alter the number of units, only the price. The number of accumulation units only alter if cash is added or within drawn - as mentioned by Chris Searle. If some of the cash retained is used to buy shares, no action is needed, which makes acc. units easy to operate.

Arb.

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Re: Unitising portfolio impossible due to timing of information?

#452892

Postby Urbandreamer » October 25th, 2021, 12:05 pm

JohnnyCyclops wrote:The HYPTUSS provides a valuation but does require both maintain and opening/running.


I do actually run an update on HYPTUSS every day. It allowes me to chart my performance.

However some time ago I went on holiday without internet. This caused me to think about automating the tracking of valuations.

GoogleSheets is the answer, as long as you are not too concerned about google knowing what's in your portfolio.
The spreadsheet can get the current prices of most shares and can run scripts.
These scripts can be linked to a timer to run the script once a day.

Here is an example script. Note that I didn't finish develop it to exclude weekends. It copies the first 8 columns of the second row of the second sheet to the bottom of that sheet.

Code: Select all

function addProduct() {
  //skip if weekend
   var day = new Date();
//    if (day.getDay()>5 || day.getDay()==0) {
//      return;
//    }
 
  var spreadsheet = SpreadsheetApp.getActiveSpreadsheet();
  var secondSheet = spreadsheet.getSheets()[1];
  var numColumns = 8;
  var firstOpenRow = secondSheet.getLastRow() + 1;
  var firstOpenRange = secondSheet.getRange(firstOpenRow, 1, 1, numColumns);
  var existingData = secondSheet.getRange(2, 1, 1, numColumns);
  for (var i = 0; i < numColumns; i++) {
    firstOpenRange.getCell(1, i+1).setValue(existingData.getCell(1, i+1).getValue());
  }
}

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Re: Unitising portfolio impossible due to timing of information?

#452991

Postby Arborbridge » October 25th, 2021, 6:15 pm

As I see it, and have always understood it:-

Accumulation units include dividend cash which is used to reinvest in further shares - that's why they are called accumulation units. The number of units does not alter unless new cash is put into to create more units, or unless cash is withdrawn to surrender units. Note: cash held on account, including new cash or dividend income will presumable be used to buy more shares eventually, ideally, but not necessarily, immediately. Buying shares with this cash held on account does not alter the number of units. A plot of unit prices would be useful for comparison with any other instrument on a TR basis

Income units in my case, exclude dividends - these are assumed to be "paid away" and do not affect the income unit price or the number of units. If new shares are bought or sold, the number of units will vary accordingly but not the unit price (until the shares market price alters). Income units are equivalent to the share price of any instrument on a non-TR basis, such as a normal share price. (or NAV chart for ITs, which excludes the premium and discount element).

Income or Acc prices are easily found at any time by using HYPTUSS (a press of one button will do it) and knowing the number of units in circulation. Acc prices need the HYPTUSS derived value plus any cash held on account. In the case of income units, there is no requirement to hold cash in the account so knowing the HYPTUSS value and number of units give the unit price immediately. However, some people choose to hold dividend cash in the account towards future purposes, and in this case each dividend (or pooled dividends over some period of time for convenience) should be used to create more units as one would with new cash.

Personally, as mentioned, I prefer to assume dividends are paid away and not held as additional income units. This is cleaner and easier to operate, and seems to reflect the name "income unit", as it provides an income to the holder.

This description of the two types is consistent with the notes given within the notes here: http://lemonfoolfinancialsoftware.weebl ... folio.html

As regards the treatment of dividends, I quote from that link:

For accumulation units:
If dividends are kept within the portfolio, and either immediately or at a later point reinvested in shares, there is no change in the number of units. All that happens is that the value of the portfolio increases, therefore the price of each unit increases a little.


For income units:

The basic principle is the same as that used to calculate accumulation unit numbers and values. But in addition to this, a calculation is needed whenever the portfolio receives income (usually dividends) but only if they are retained within the portfolio. If income is withdrawn, (e.g. to live on!) then neither the number or price of units change.

However if the income is retained within the portfolio, then this income "buys" additional units, (in contrast to accumulation units, where it simply increases the price of the units already owned).


As regards the original question about timing, I do not believe this is a significant difficulty - particularly with income units if the income is treated as paid away.

Arb.

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Re: Unitising portfolio impossible due to timing of information?

#453096

Postby funduffer » October 26th, 2021, 8:40 am

Arborbridge wrote:

As regards the original question about timing, I do not believe this is a significant difficulty - particularly with income units if the income is treated as paid away.

Arb.


Spot on, Arb.

The only time you need a portfolio valuation is just before a sale, or a purchase of share with new cash from outside the portfolio.

I personally have HYPTUSS up and running, and update the valuation just before I hit the 'trade' button in my broker's software. I then use the HYPTUSS valuation and the sale/purchase information from my broker to update my unitisation spreadsheet. The objective is to get the change in the number of units correct.

Since I only make a handful of trades each year, it is not much effort at all.

FD


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