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Question: How can I show investment returns on a diversified portfolio with components of current income, appreciation, and capital gains?


Let's illustrate this with an example.

Suppose that there is $10,000 invested, and you expect 1% interest income, 2% dividend income, 0.5% capital gains income, and 4% appreciation.

Here are the steps to take:

1. Divide the investment into three assets, one asset for each category of current income. In this case, we will make the asset values $3,000, $3,000 and $4,000 (roughly equal, adding up to the $10,000 total).

2. Enter those three assets in the software.

3. For each asset, specify and appreciation of the overall appreciation rate you expect. In this case, that would be 4%.

4. Calculate the dollar amount of income you expect from the current income investments. In this case, that would be $100 of interest income, $200 of dividend income and $50 of capital gain income.

5. Enter that dollar amount for each asset, and specify the appropriate tax category.

a. Dividend Investment, Value: $4,000. Net Cash Flow: $200. Tax Category: Dividend.

b. Capital Gain Investment. Value: $3,000. Net Cash Flow: $50. Tax Category: Capital Gain.

c. Interest Investment. Value $3,000. Net Cash Flow: $100. Tax Category: Interest.

All of these investments would have an appreciation rate of 4.0%.

You will then have the following results:

1. The entire investment will appreciate at 4%, as desired.
2. The current investment income amounts will be in the dollar amount and tax categories anticipated, as desired.
3. Over time, the dollar amounts of current income (interest, dividend, and capital gains), will increase with the appreciation of the asset, as desired.

In short, you will have modeled the investment situation you wish.

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