How to Actually Read Your Retirement Account Statements
You’ve probably invested in a 401 (k) or IRA, but you may not know how to actually read your investment reports. The portfolio uses a lot of confusing numbers and jargon. Here is a handy guide to help you decipher it.
Obviously, the look and feel of your reports will differ depending on which firm manages your retirement account and how complex your investment is. The items we mentioned may appear in different places on your statement. Or they could be called a little differently. But all of them, as a rule, should include information of the same type. To make things easier, we have divided the reports by summary, detail, and characteristics.
Short report
Typically, your investment account summary tells you a few basic things:
- Balances in your account
- The types of funds you invest in (“holdings”).
- A summary of any recent transactions
In the image above, each of these categories is highlighted in blue. But let’s look at them in a little more detail.
- Balances : It’s pretty straightforward. This is how much you actually have in your account after the transactions. Here are a few more terms and information that may be related to your balance sheet.
- Return: the amount of your investments has increased or decreased in value depending on their effectiveness. This may also be shown as a percentage on your statement.
- Initial Balance: This is the balance you started with at the beginning of the billing cycle (possibly the first of the month). Depending on your recent transactions and your income, your starting and ending balances are usually different. Your balances can also be charted over time. In this case, your starting balance may coincide with the starting date of this chart.
- Taxable or non-taxable income if your investments earn interest, it can be stated in your statement as taxable or non-taxable income, depending on the type of your account. To learn more about how your investments are taxed, check out our post on the subject .
Recent Transactions : Again, this is self-explanatory. This may display a summary of the transactions that have occurred since your last checkout. In the next section, we will look at the types of transactions that are commonly associated with an investment account. But a summary can show the basics:
- Purchases: Any money credited to your account. Contributions, employer contributions or renewals, for example.
- Withdrawal: Any money you have withdrawn from your account. Perhaps a loan.
Your investments or holdings : Your holdings are the actual products you invest in: stocks, bonds, company stocks, mutual funds, etc. Holdings can be explicitly listed using a ticker on your report, or they can be represented in the form of the total percentage. Here are some phrases related to your assets.
- Asset class: These are the general types of investments that you own. Most often you will see stocks (stocks), fixed income (bonds) and their equivalents (money market) . ” So you can also see these words in your statement telling you what percentage you invested in each class.
- Asset composition / asset allocation. The composition of your assets shows what type of generic products you hold. Again, they can be presented as a percentage. Or they can be represented as a pie chart. If you’re wondering how to allocate assets, we have a beginner’s guide to get you started.
Account details
After the basics, your application should include more details. Your account details must include:
- List of transactions since your last statement
- Your specific investment
- The cost of this investment
Let’s take a closer look at each of these areas to see how your guide might display this information.
Your specific investment and its value: The summary of your report shows your total assets. The rest of the statement should show you exactly what these holdings are besides their class. In addition, you should see the value of your specific investment. Typically you will find:
- Price : The cost of your particular type of investment. Since the price fluctuates, the statement must show the price for a specific date.
- Share : This is a unit of ownership. Your report may indicate how many shares you have in each asset. It can also display the number of shares involved in a particular transaction. It can display the stock price for specific transaction dates.
- Price Change : This is the amount by which the value of your investment has changed, usually based on the opening and closing dates of your statement.
- Volume : The number of shares in a transaction is sometimes referred to as “volume”.
“If you are unsure about the investments that are listed on your application, a quick Google search using the ticker will give you a better understanding of how your money is being invested,” said Mabel Nunez, founder of a stock market investment education company. Girl $ on the money .
And don’t forget that your investment broker is a resource too, especially if you’re targeting mutual funds rather than individual stocks. “For example, if your claims come from Vanguard, make sure you use Vanguard as a source to research your funds,” she said. “Many financial portals provide information about funds. Therefore, for greater accuracy, it is important to contact the parent company of the fund. “
Transaction History: You can see different types of transactions in your investment account. Here are some of the most common ones:
- Contributions : money deposited into your account. This amount can be automatically deducted from your paycheck. Or maybe you are lucky to have an employer who deposits a certain amount into your account. (In an ideal world, you have both .)
- Dividends : Sometimes companies distribute a portion of their profits back to shareholders in what is called a dividend.
- Profit and loss : it’s like your return. But it shows how much the value of a particular investment has increased or decreased. Sometimes this is displayed as a percentage. If you buy or sell an investment, this is called a “realized” profit or loss.
- Exchange and exchange : Your investment plan can be managed by a company that selects certain funds for you. In this case, they may decide to exchange one fund for another, and this exchange will be noted on your statement.
Account Fees : Your statement may also include fees associated with your account or individual funds. This can be explicitly indicated as a fee, or it can be called a cost ratio . Or both. In any case, these are commissions associated with your portfolio. If this information is not on your statement, you can usually find it by checking your accounts online or by calling your investment broker.
Portfolio indicators
After you familiarize yourself with your account in detail, your statement may provide a basic analysis of the state of your investment. Much of this information can already be found in the detailed part of your application. But some statements summarize it all at the end to give you an idea of how you are doing. Typically, your work will include:
- Rate of return : The amount by which the value of your investment has increased or decreased, based on dividends, gains and losses. Shown as a percentage.
- Return on Investment : The amount you earned from your investment based on dividends, P&L. Displayed as a dollar amount.
- Comparison : In some cases, your portfolio can be compared to the market. An investment firm can show how your stock style or rate of return relates to the general market. (If your portfolio is lagging behind the market, you may want to rethink how your investments are allocated.)
It is important to keep an eye on your investments, but when investing long-term, do not want to get carried away by the ups and downs of the market. “Consider, don’t react,” said Molly Ward, financial advisor and financial advisor to AXA Advisors . “If your bill falls, remind yourself that fluctuations are normal. If there is a dramatic change from the previous month, that’s okay. Keep your emotions in check if you see a big slump. “
Nunez agreed, advising investors to analyze growth quarterly or annually rather than monthly. “Looking at the reports every month will tell you little, as this is a very short time frame for the stock market. Focus on trends over time and how your investment account has grown from year to year, ”she said.
These statements can be confusing because different investment firms use different jargon and present your information in different ways. But in general, you want to know what you have invested in, how that investment is doing, and how your balance sheet changes over time.
This post was originally published in 2015 and was updated on December 12, 2019 to include more recent information.