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Interpreting Your Brokerage Statements

I hear over and over – “I don’t even open my brokerage statements” or “I let them pile up in a big shopping bag.” When some clients come to see me, they just bring their bank and brokerage statements in the envelope – unopened! While I definitely suggest opening your statements, I realize that they can be overwhelming and difficult to read. I have come up with a short exercise you can do to better interpret your brokerage statements and gauge how you really are performing. Just because the numbers are going down, doesn’t mean that you are doing so terrible! 

This exercise should take you 15 minutes but will buy you many evenings and hours of restful sleep. Isn’t 15 minutes worth peace of mind? I think so! You will be doing this exercise on your most recent statement. This can be your 401k, IRA or regular investments. Once you are done, keep it in a file or folder so you can refer to it.

1)       Write the price of the stock or mutual fund when you bought it or total dollar amount it cost you. Also, list the date. Some statements list it but many don’t.

2)       Look at your mutual funds, stocks and bonds and categorize which investment type they are. Are they small-cap growth or large-cap value? This is very important for figuring out your asset allocation. Do you have too much in one investment type (“I didn’t realize I had 80% of my portfolio in Large-Cap Growth!”)?

3)       Instead of thinking “I’m losing so much money!” do a quick analysis and compare yourself to the market. You can do this on for your mutual funds. Plug in the ticker to get the Quicktake report. Then look at the performance chart, where it says +/- cat and +/- index. This tells you if your mutual fund is over or under performing similar funds and a comparative index. If you are doing better than the average or comparative funds, you can breathe a sigh of relief. Write + or - if you are performing worse than the market or better. Also, take this time to write how many Morningstar stars your mutual funds merit (1 through 5 with 5 being the highest rating).

4)       How much are you earning on your money market at your bank or brokerage account? While it is probably earning a very low interest rate, you could earn more. Check out for a higher interest paying money market or look for an Ultra Short-Term Bonds mutual fund elsewhere.

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