BusinessWeek Investor -- The Barker Portfolio
A Capital-Gains Miracle Worker
I don't believe in Hell. I might reconsider, though, if I could be sure that a special spot there awaits everyone responsible for the earthly torment that is Schedule D, where investors report capital gains and losses to the Internal Revenue Service. This annual torture is only getting worse with today's endless parade of mergers, spin-offs, carve-outs, special dividends, and stock splits. Any can wreak havoc with the numbers you need not just to fill out Schedule D but also to minimize capital-gains taxes.
That's why I suspect many active investors will cry hallelujah after they spend a little time at a new Web site, www.gainskeeper.com. The service, now being offered free to early registrants, is the brainchild of a Quincy (Mass.) startup formed last year by veterans of Fidelity Investments and Andersen Consulting.
To see how GainsKeeper works, I recently spent lots of time at the site, creating portfolios, real and imaginary, and testing the tools. Dreaming, for example, that I had been wise enough last January to purchase stock in fiber-optic-equipment maker Uniphase, I entered an imaginary position of 150 shares bought at $69. GainsKeeper caught my mistake when I tried to enter the stock's current ticker symbol, jdsu, which it adopted after a merger last July, instead of the one it had when I "bought" the stock, unph. So I entered unph and recorded the purchase. A click or two later, GainsKeeper rendered a full record of how those 150 shares had mutated: Two stock splits, one merger, a new ticker symbol, and a new name, jds Uniphase later, I had 600 shares worth $109,800. My total cost, including a $29.95 brokerage fee: $10,379.95. My unrealized long-term gain: $99,420.05.
GainsKeeper did that by reaching into databases with records of splits, spin-offs, and other "corporate actions." Even if you're a buy-and-hold investor, these events can make finding your "basis," or adjusted cost, in a stock a horror (table). But in my imaginary portfolio, GainsKeeper showed itself able to do much of the work automatically. The service adjusted the basis for stock in General Motors that last May spawned shares in Delphi Automotive Systems, allocating the right portion to gm and Delphi.TAX-SAVVY. You also can go to GainsKeeper, enter your entire trading record for 1999, even across multiple investment accounts, and print an aggregate report that you could copy onto Schedule D. As 2000 progresses, you might enter your trades as you go along and be set for next tax season. GainsKeeper also can help you trade in a tax-savvy way by continuously tracking your gains and losses, short- and long-term, realized and unrealized. It details which lot of stock might be the best to sell. If you bought, say, 300 shares of ibm in three separate lots of 100 shares at various prices, you'll want to tell your broker to sell the highest-cost lot first to minimize the capital gain--and your tax bill.
GainsKeeper doesn't work as well with Net- scape's browser as with Microsoft's Internet Explorer. It worked fine at America Online, but was unbearably slow clearing business week's corporate firewall. It didn't record holdings in fractional shares, a big problem for anyone reinvesting dividends. The company says that will be fixed soon, but full tracking of mutual funds and moving data to and from software such as Quicken or your broker's computers may be some time off. Finally, and not least, many people will balk at posting so much private data. That's a personal choice. For what it's worth, ceo Duncan Routh told me: "We don't have a business if we don't respect privacy."
Despite its deficiencies, I see GainsKeeper as a terrific innovation. If brokers want to serve clients as their ads promise, they'll follow suit or go one better. Even if you don't use GainsKeeper, you can help yourself by asking your broker when he'll hand you such a sharp tool.Questions? Comments? E-mail email@example.com or fax (321) 728-1711By Robert BarkerReturn to top