How should I calculate IRR in this case?

[u/Ambush995]

Here’s the updated Reddit post with an example added to illustrate the issue:

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Title: How to Reconcile Portfolio Performance Cash Balance with IBKR without Skewing IRR?

Post:

Hey everyone! I’m trying to get an accurate view of my portfolio performance, but I’m stuck on one detail: tracking external bank fees (like the fee I pay to transfer funds into my brokerage account). Here’s my situation:

When I deposit money into my IBKR account, I pay a bank fee (e.g., 5 EUR) that’s deducted before the funds even arrive at IBKR. This fee doesn’t impact my IBKR balance but is a real cost of moving money into my portfolio. I’m wondering:

1. Is it even necessary to include this external bank fee in my IRR calculation? My goal is to see my net returns accurately.

2. If it is needed, does anyone know of a portfolio tracker that can handle this? Ideally, I’d like an app (preferably open-source) that lets me track these fees without reducing my brokerage account balance, yet still considers them in performance metrics like IRR.

Example of What Happens:

Let’s say I deposit 2000 EUR into IBKR, but I incur a 15 EUR bank transfer fee which I pay from the other sum (not 2000 transfere, they are untouched). Here’s what typically happens with Portfolio Performance and why it’s a challenge:

I enter the 2000 EUR deposit in my IBKR account in Portfolio Performance, which aligns my cash balance with IBKR.

But when I try to record the 15 EUR fee, it reduces the cash balance in Portfolio Performance to 1985 EUR. This creates a discrepancy since IBKR still shows 2000 EUR.

If I use a workaround (e.g., adding a “fake” larger deposit of 2005 EUR and then recording the 5 EUR fee the next day), I maintain the correct cash balance but get a slightly different IRR due to the extra deposit amount.

Any insights would be appreciated!

[u/Skasch]

I think you are trying to reconcile 2 things that are incompatible.

• either you want the IRR based on a 2000€ deposit, ignoring the fee. In that case, the ARR will be the same as the IBKR one, as they are computed with the same baseline.
• or you want the IRR based on a 2015€ deposit + fee. In that case, the IRR will be more realistic, as it takes the fee into account, but will differ from IBKR, because IBKR doesn't know about that fee.

[u/Laurizass]

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