By Xavier Brenner Your brokerage account is an important and detailed score card of your investments. Most investors don't have too much trouble finding the big picture data. We naturally zero in on the overall value of the portfolio, the percentage increase or decline from the last reporting period, and dividends produced by each security if applicable.
But stopping there is like getting the score of a football game but not digging deep into the player statistics to really understand how the team is performing. One reason may be the wall of jargon investors face when they tear open (or download) their portfolio statements. We're here to help. Here's a handy guide to help you cut through the jumbo mumbo and really get a handle on your financial statement.
Capital gains vs. distributions
A capital gain refers to the appreciation in value of your security after factoring in the original cost and fees. A capital distribution is a different bird. This is a payment by a mutual fund to shareholders of the profits derived from the sale of the fund's securities. By the way, this is a taxable event, so keep track of capital distributions.
Want to know what fees you are paying to your broker to buy and sell securities? Well, you probably won't find it on your account statement. Better to check the confirmation statement you receive when you buy or sell. If you still aren't clear on commissions, call you your broker and ask. Remember: he or she is working for you.
Any sound investment strategy sets allocation goals for stocks, bonds, cash and alternative assets. You want your portfolio to be suited to your risk profile, investment goals and diversified across asset classes. Account statements usually break out asset classes and the percentage they make up of the total portfolio.