# Why does the bonds display not include the dividends when calculating loss/gain?

I bought bonds at Fidelity recently. The yield went up so the price went down, so it shows a loss. Okay. But dividends get paid out and those don’t get used to calculate the overall loss, so it looks worse than it is. I find that strange. Has no one figured out a way to display the true return? I have accounts in Vanguard too where I bought a few bonds, and now I don’t trust the calculated loss/gain there either.

The display is intended to suggest the US income tax situation. When you sell the bonds, you will have a realized gain or realized loss, and that realized gain or realized loss will just be based on what you paid and the selling price, not affected whatever dividends you received.

Stocks work the same way, including both individual stocks and stock mutual funds. If you buy a stock for \$100 and you sell it for \$95, you have a \$5 per share loss, even if you received more than \$5 in dividends.

If you’re planning on holding the bonds to maturity, you should know what the yield is. Of course if you sell it early at a loss/gain, it yield will be lower/higher.

I bought some 20-yr around 5% a month ago, and it showed a loss for a while but just turned profitable yesterday.

If you want to calculate the true yield, you would need to track the values and dates of all inflows and discount them back to the day you purchased them in Excel. Suppose you bought a 2-yr CD:

Yield X%
Date Time Amount Discounted
11/15/23 0.00 years -10,000 -10,000*(1+X)^-0
11/15/24 1.00 years +500 500*(1+X)^-1
11/15/25 2.00 years +10,500 10,500*(1+X)^-2

Now if you plug in X=.05 the sum of the discounted payments should equal \$0, so the yield is 5%.

I have this set up because I wanted to know the rate of return of immediately cashing in my stock purchase plan and paying the taxes and commissions. The rate of return is still something like 50%.

(I thought I was posting this in the early retirement discussion form, probably didn’t need to offer this advice to actuaries - need to wake up)

And the dividends are a separate tax issue.

Just checked Vanguard and I think they have a separate view that looks at this.