Chapter 12. Investments

Ace Jones

Michael Carpino

Revision 5.0.3 (2019-04-04)

Investments in KMyMoney

Investments

In very general terms, an investment is any allocation of money with the expectation of a future benefit. KMyMoney's Investment accounts are designed for one particular type of investment: securities. A security investment (or just a security) is an instrument for investing money that is traded on a market with the intention of a profitable return in the form of either appreciation in value, or income such as interest or dividends. Stocks and mutual funds are the most common securities; and they are the ones specifically supported within KMyMoney. Bonds have a different financial structure, but can usually be handled by KMyMoney. Futures, commodities, options, and more complex investment instruments like derivatives are other types of investments, but KMyMoney has no special functionality for them. As long an investment has similar characteristics to a stock or mutual fund, it can be tracked.

Base Currency

Each security has a Base Currency. This is the currency in which it is traded. When a price quote is entered for an investment, the currency of the value given is always its base currency. A stock on the NYSE (New York Stock Exchange) would be in US dollars (USD), and one on an Australian market would be in Australian dollars (AUD). The Base currency for a security does not need to be the same as the default currency for the Investment account holding that security.

Investment Accounts

An Investment Account holds a collection of Securities, also referred to as Equities. An Investment account contains transactions, recording activities such as buys, sells, dividends, reinvestments, yields, splits and income of those investments. Each transaction in an Investment account must relate to a specific security.

It is common for an account at a Brokerage Institution to contain both securities and cash. In KMyMoney, an Investment account holds only securities. It cannot contain any cash balance. This was a design decision made when Investment accounts were first included in KMyMoney, and it might be changed in a future version. For now, any cash needed to purchase a security or gained from a sell or dividend transaction requires the use of a Brokerage Account.

Brokerage Accounts

When an investment transaction uses (to buy a security) or produces (from a sell or dividend) cash, that transaction must refer to another account which can hold the money, most commonly a checking account. You can specify any suitable account for any investment transaction which requires one. However, KMyMoney has the concept of a Brokerage Account, also sometimes referred to as a Cash Account, which is the default account for such transactions.

When you create an Investment Account, you have the option of creating an associated Brokerage Account with it. The default name of the Brokerage account will be the name of the investment account with " (Brokerage)" appended.