Convention for adding ishares (ETFs) into personal accounts

Question

I use GNUcash to manage my personal accounts.

Please advise me on how I should enter ETFs, specifically ishares which are Blackrock's brand of ETF, into my personal accounts.

The default set of accounts in GNUcash is investments:brokerage account:Bond/Market Index/Mutual Fund/Stock where : separates account headings (hierarchies) and / separates different accounts under hierarchy brokerage account.

derobert · Accepted Answer

What account you put it in depends on why you have those different accounts.

First, if you have them due to regulatory requirements, then you of course must follow said regulations. I doubt that's the case here.

Otherwise, you might be splitting based on how they trade (ETFs trade as stocks) or you could be splitting based on how you build a portfolio out of them.

When you build a non-speculative stock portfolio, you typically want to limit your holdings in a single stock to a fairly small portion of your portfolio (say, 3%) to limit your exposure to bad stuff happening to a single company. That doesn't apply nearly a much to mutual funds, especially index funds. ETFs are much more like mutual funds here.

You can also, of course, create an ETF account and put them there. You also say you have a market index account, what is that used for?

littleadv · Answer

ETF is essentially a stock, from accounting perspective. Treat it as just another stock in the portfolio.

Artmancc · Answer

ETFs in the US — I don't know if this type of security exists elsewhere — have some characteristics of both stocks and of mutual funds.
For example, some mutual funds that exist in various classes (retail investor, institutional, adviser, etc.) are available as an ETF that is considered, at least by the mutual fund company and perhaps regulators, as a class of mutual fund. And like mutual funds, ETFs are a basket of other investments, e.g., stocks or bonds, or both.
But to me it makes more sense to enter them into GnuCash as "stock" instruments if only because they trade on a stock exchange (mostly the Amex, I believe) like stocks. Yes, some ETFs are full of bonds, but bonds, too, but unless you are tracking your asset allocation, which is another issue entirely, it doesn't matter.
In the end, however ... and I say this as a GnuCash noob ... I don't think it makes any difference. Or at least I haven't (yet) seen why it would make a difference. And if I am wrong, I hope someone will explain why. Thanks.

Convention for adding ishares (ETFs) into personal accounts

3 Answers

Add your own answers!

Ask a Question