Investments

Stocks, mutual funds, bonds and fixed assets in the books - one STOCK or MUTUAL Account per holding, shares as amounts, prices in the price database, income Accounts for dividends and interest, and how fees, dividends and returns are recorded.

An investment is something you buy hoping to earn from it or sell it for more. This page covers how the books hold the common kinds. For gains see Lots and capital gains.

Words you will meet

Term	Meaning
Security	A Commodity that is not a currency: a share, a fund unit, a bond. ⚠ GnuCash's stock is a share of a company; `STOCK` is also the Account type
Capital gain or loss	The difference between purchase and selling prices. Also realised gain or loss
Commission	The fee a broker charges to buy or sell
Dividend	A cash payment a company makes to its shareholders
Interest	What a borrower pays a lender for the use of money, usually a percentage of the principal per year
Compounding	Reinvested interest that earns interest of its own
Principal	The original sum invested or borrowed
Yield	The income an investment earns, as a percentage of its price; it leaves out capital gains. A $100 share paying $2 a year yields 2%
Return	Income plus capital gains or losses. ⚠ Not a return of capital
Risk	The chance that the return differs from what was expected
Liquidity	How easily it turns into cash
Valuation	Working out what it would sell for now
Stock split	More shares for each existing one, at no cost, with the price adjusted so the value does not change

Kinds of investment

Interest-bearing accounts, such as savings and certificates of deposit: ordinary BANK Accounts. Interest is income, recorded as a Transaction from an INCOME Account.
Stocks and mutual funds: a mutual fund is treated exactly like a single stock, for tax and for the books.
Fixed assets, a house or a painting: value is hard to know until you sell, so there is little to do beyond recording the purchase and the sale (Other assets and depreciation).

Setting up a holding

Make the security with commodity.create (namespace such as NASDAQ, mnemonic AMZN).
Make an Account of type STOCK (or MUTUAL) for every security you own, holding that Commodity, usually under an Assets:Investments:Brokerage branch, named by the ticker. The Account's balance is in shares, not money: 100, not $2,000.
If you track income per security, make Income:Dividends:AMZN, Income:Interest:AMZN and capital-gain Accounts such as Income:Cap Gain (Long):AMZN and Income:Cap Gain (Short):AMZN, and an Expenses:Commission Account.
Put a Price for the security in the price database (price.add), once, and keep it current.

red-ale has no predefined investment Accounts. An Account can remember the Accounts for a security's roles (dividends, capital gains, cash proceeds, broker fees) as its associated accounts.

Buying

A purchase is a Transaction in the currency you paid, with a Split in the stock Account that has an amount in shares and a value in money (Value and amount), and a Split in the bank or brokerage Account paying for it. The share price is value / amount; give the amount and the value and let the price follow, so that no rounding is hidden in it.

Commissions can be handled two ways. In gross pricing you record the price before fees and put the fee in an expense Account in a third Split: this tracks fees but the gain scrub does not know to deduct them, so work gains out yourself. In net pricing you record the price including the fee and no expense: it works with the lots, but the price in the database is the effective price. Take advice if you are unsure which your tax rules want.

Selling

A sale mirrors the purchase: negative value and amount in the stock Account, the proceeds in the bank Account, and a gain or loss Split in an income Account. Lots can compute the gain by FIFO and record it for you.

Dividends

Cash dividends are income into the Account that received the money, from Income:Dividends. To tie a dividend to one holding, add a Split in the stock Account with amount 0, price 1 and value 0.
Reinvested dividends (a dividend reinvestment plan, DRIP) are recorded in the stock Account: the Income Account is credited and the stock Account receives the new shares.
A return of capital has no income to record: it only lowers the cost basis, and the number of shares stays the same. Record a Split in the stock Account with amount 0 and a negative value equal to the capital returned, against a debit to the bank Account. stock.split cannot do this.

Stock splits and mergers

stock.split records a split. A merger that swaps shares at a ratio (0.77942 new shares for each old one) is a stock split in each affected holding, with shares the change in the number held ("-22.058" for 100 shares). Give price only if you want a new Price recorded.

Reports

The Investment Portfolio, Advanced Portfolio and Investment Lots reports show holdings, cost, gains, income and returns.