A Clear Guide To Understanding Your Investment Statements

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.





Details matter

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.


Asset Allocation

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.

If your portfolio is drifting away from its original investment goals, you should be talking to your broker about rebalancing your portfolio to get back on track.


Coupon rate

This is the original interest rate on the bond when it was issued.

The interest, or coupon, payment is usually made out semi-annually.


Accrued interest

If you own fixed income securities, this refers to the amount of interest that would be received up a sale.

It's typically calculated from the last coupon payment through the closing date of the account statement.

This is good information to know if you decide to sell.


Cash Equivalents

These are assets that are super liquid. That is, they can be converted into cash quickly.

Think money market funds and certificates of deposit.


Estimated Income

This refers to the amount of a dividend in the case of stocks or interest in the case of bonds you can expect to receive on an annual basis.

Bond investors also pay attention to the current yield, the annual interest of a bond divided by its market price.

Stock investors eye the dividend yield, or the dividend amount divided by the stock price.

The current yield and dividend yield allow you to compare your investment with others.


Margin Debt

Investors who use borrowed money to buy stocks are said to buy on margin.

Margin debt is the difference between the collateral deposited to make the trade and the amount he or she borrowed.

If the value of the stock goes down dramatically, the investor may be required to put up more money or sell the security.



So let's assume you're having a good year and received ample dividends, interest payments and capital gain distributions.

You can take those distributions in cash. Or you can use that capital to purchase additional securities.

If you did, that should be referenced on the account statement.

Don't be put off by the fancy language.

Your financial advisor has an obligation to generate financial statements that use clear and accessible terms.

So there's no reason to stumble around in the dark

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DISCLAIMER: The information contained in this article is general in nature and not intended as specific advice. Neither Covestor Limited nor its representatives are engaged in rendering tax, accounting or legal advice. A qualified professional should be consulted regarding the effect of such considerations on the matters covered in this article.
Barrack Yard Advisors

Barrack Yard Advisors

Portfolio Manager Martin Leclerc is a 30-year veteran of the investment management business. He began his career at Dean Witter