return question

this may be stupid, but I am stuck.

Basically, one of my funds has a 4.4 percent average return over the last
eight years. I have put 4,900 of my own cash into the fund over that time,
and have taken out about 3,400. I have about $2900 in it now, if I sold
today. The investmetn income from the fund (long/short term gains,
dividends, which were ALL reinvested) is about 2800.

My question is this. I think if I sold all my remaining shares, i would
have a loss of about $1,300. How could I have a loss if the fund gained
4.4% over the life of the holdings? Did I actually lose money? not from
what I can tell what I've put in.

Re: return question

SeaKan wrote:
> this may be stupid, but I am stuck.
>
> Basically, one of my funds has a 4.4 percent average return over the last
> eight years. I have put 4,900 of my own cash into the fund over that time,
> and have taken out about 3,400. I have about $2900 in it now, if I sold
> today. The investmetn income from the fund (long/short term gains,
> dividends, which were ALL reinvested) is about 2800.
>
> My question is this. I think if I sold all my remaining shares, i would
> have a loss of about $1,300. How could I have a loss if the fund gained
> 4.4% over the life of the holdings? Did I actually lose money? not from
> what I can tell what I've put in.

I think you should do your own homework.

Re: return question

"SeaKan" <> wrote in message
news:
> this may be stupid, but I am stuck.
>
> Basically, one of my funds has a 4.4 percent average return over the last
> eight years. I have put 4,900 of my own cash into the fund over that
time,
> and have taken out about 3,400. I have about $2900 in it now, if I sold
> today. The investmetn income from the fund (long/short term gains,
> dividends, which were ALL reinvested) is about 2800.
>
> My question is this. I think if I sold all my remaining shares, i would
> have a loss of about $1,300. How could I have a loss if the fund gained
> 4.4% over the life of the holdings? Did I actually lose money? not from
> what I can tell what I've put in.

Obviously, if you are taking away more than you put in, you haven't had an
actual loss. Mutual funds are required to pay out most of their gains and
income each year in the form of dividends in order to avoid being taxed,
themselves. You presumably reinvested these dividends, increasing your cost
basis. So on paper, you may well realize a loss when you sell. You were
paid your gains and chose to invest them in more fund shares.

My very first mutual fund investment paid an $80 dividend about a week after
I put the money in. I was suddenly libel for taxes on this. The share
price dropped with the dividend but with my reinvested shares the value of
my investment was exactly the same. I remember being very confused by this
until I realized that if I sold the fund, I would make an $80 loss which
would cancel out the $80 gain.

This is why I am very skeptical of people who compute their own returns.
Much like the gamblers discussed in another thread, they usually fail to
account for their costs (the time value of reinvested dividends) and
overstate their return.

-herb