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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.
The illustration below shows how these items would be entered:
You will then have the following results:
1. The entire investment will appreciate at 4%, as desired.
In short, you will have modeled the investment situation you wish.