BACK TO BASICS: Understanding Your Investment Statements

No one wants to admit that they don’t open their investment statements, let alone that when they do, they don’t completely make sense. But you can’t ignore them. Just like reviewing your bank statements is essential to understanding your monthly income and spending habits, it is equally important to understand your investment statements, which are sent either monthly or quarterly. They both are part of actively managing your money.

Your investment statements help you track the performance of your portfolio(s), 401(k), Thrift Savings Plan (TSP), 403(b), 457, Individual Retirement Account (IRA), and investment accounts by letting you examine your individual investment holdings. One way to do this is by comparing investment purchases and sales to confirmation statements received during the period. You can also review any withdrawals from the account and verify that the statement accurately reflects what has transpired within the account. Check for errors or transactions you don’t recognize; if you see inaccuracies, contact your financial advisor or the investment management firm.

Basic Account Details

Let’s dive in! On the first page or at the top of the second page, your name, address, and account number should appear. Below this, there is a section providing the information of your financial advisor: her name, address, and phone number.

What’s My Total Portfolio Worth?

Portfolio Summary highlights the major changes within your portfolio for a specific period of time. This summary shows the opening value of your investments at the beginning of the period and closing value at the end of the period. It provides information on deposits, cash, and securities as well as withdrawals. And you can also find the change in value and, if included, the portfolio’s rate of return, which is calculated based on how much the account increases or decreases in value during the period. Understand that with each section, the statement goes deeper into explaining the dynamics of your account and what happened during the period.

What’s in Cash?

Cash Flow Summary breaks down the specific items that affected cash in your account. For example, the summary explains how cash came into your account and from where. Some transactions are check deposits and others may be electronic transfers from your bank using the automated clearing house (ACH) Network. Cash can also be generated when a stock, mutual fund, or exchange traded funds (ETF) pays out dividends, or from interest earned from a money market fund and/or CDs. The statement also shows the amount of cash from the account that was used to purchase securities.

What Do I Own and What is It Worth?

Investment Detail shows what you have in cash and various individual investment holdings. It explains how many shares you own, the purchase price of the investment, the current or market price of one share, the total value as of the end of the period, and whether you’ve made (unrealized gain) or lost (unrealized loss) money within that investment. An unrealized gain or loss becomes realized when the investment is actually sold out of the account. You will also see how much income that specific investment will provide for the year. Over time, this amount can grow (or decline) if you purchase (or sell) more shares of the investments.

Activity Detail explains the specifics of all the individual transactions that occurred in the account. You will see the date of each transaction, the specific type of transaction—such as interest, dividend, or capital gain—the description of the specific investment holding, and the amount that holding added to your account. Interest, dividends, and capital gains can all increase the value within your account, contributing to the compounding of your overall portfolio.

Another resource for information on statements is at FINRA.

Zaneilia Harris, CFP®, is the president of Harris & Harris Wealth Management Group in Upper Marlboro, Maryland.  Follow her on Twitter at @hhwealth.