When you get an investment report, you might feel like you’re looking at a brainteaser instead of a financial statement. The numbers, abbreviations and lingo can be overwhelming. The good news is that with a little knowledge and practice, you can easily understand account activity on any investment report you get.
Similarities in Investment Statements
No matter who you invest with, financial statements will contain similar information. The terms may be different from broker to broker (companies that buy and sell investments), but you just need to know what to look for—regardless of the lingo. Here is what you should be able to find on your statements:
This includes your name and address, along with anyone else linked to that account (like your spouse). It should also list account numbers and other personal information.
Your statements will show the activity for the time frame listed, usually a month or a quarter. It will list the amount in your account at the beginning and at the end of the time frame, as well as the gains or losses.
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Think of your investments as slices of a pie that are cut up in various sizes. Your statement will show each pie piece and the percentage of the account it represents. You may have individual stocks, mutual funds, cash, money market funds, or bonds. Each of these pieces makes up your investment pie.
Your report will list the stocks you have in every fund you’ve invested in. For example, let’s say you invest in three different kinds of mutual funds: growth, growth and income, and aggressive growth. Each fund contains several stocks. Your investing report will provide information about each stock in each fund and its performance, good or bad.
This section shows a simplistic summary of how your stocks are doing. It’s usually a graph that charts the ups and downs over a longer period of time, like six months or even a year or more.
If stocks or other assets are bought or sold, the transaction will show up in an investment statement.
If your broker buys or sells stocks or other assets, you will likely be charged a fee. You may also see a yearly fee for administrative services.
If you find an error in activity or fees, talk to the brokerage firm you’re working with. You can also talk to them about any concerns you have. If they’re not willing to answer questions and discuss your account, take your money elsewhere!
Things to Keep in Mind
Knowing what’s on your statement is important, but it’s also important to use that information correctly. Cash Tunstall, advisor at Southwestern Investment Group, recommends four things to keep in mind as you read your reports.
- Pay attention to the number of shares you own in a company, not just the gains or losses. Regardless of how well the market is doing, you haven’t lost anything if you haven’t sold your stock. You still own the same number of shares, and maybe more, over time. Most funds will make money if you don’t bail out too soon.
- Don’t freak out over downward turns in the market. Expect it. When the market dips—and it will—you have the chance to buy stock at a discount. When the market recovers—and it will—you will have more shares of a stock that are worth more money.
- Remember, the situation is never as good as it seems—and it’s never as bad. Don’t overreact to your statements. The average return on an investment is typically earned over many years, not overnight. Negative months, quarters and even years are normal when investing in some funds (like growth stock funds). And historically, the best days in the market follow some of the worst!
- Stay focused on your time horizon. Investing is a marathon, not a sprint. A couple retiring today could still plan to invest for 30–40 more years. Time and compound interest are your best friends when it comes to your retirement portfolio.
Investment statements aren’t written in some foreign language that only financial nerds can understand. The more you learn about your account, the more confident you’ll feel. And you’ll be able to make better informed decisions about your retirement. You can’t leave that up to anyone else.
Want more information on investing? Talk with an investment professional.
This article provides general guidelines about investing topics. Your situation may be unique. If you have questions, connect with a SmartVestor Pro. Ramsey Solutions is a paid, non-client promoter of participating Pros.