How to Read Your Investment Statements (and Actually Understand Them)
You probably have money invested in a 401k or IRA, but maybe you have no idea how to actually read your investment statements. There are a lot of confusing numbers and jargon that go into a portfolio. Here’s a handy guide to help you decode it.
Obviously, the look of your statements will vary, depending on what type of investment account you have. The line items we mention might appear in different spots on your statement. Or, they might be called something slightly different. But they should all generally include the same type of information. To make things easier, we’ve broken up statements by summary, detail and performance.
Generally, your investment account’s summary will tell you a few basic things:
- Your account balances
- The type of stuff you’re invested in (“holdings”)
- A summary of any recent transactions
The above image highlights each of these categories in blue. But let’s take a look at them in a little more depth.
Balances: This is pretty straightforward. It’s how much you actually have in your account, after transactions. Here’s some other jargon and info you might see associated with your balance.
- Return: The amount your investments have increased or decreased in value, based on their performance. On your statement, this may also be presented as a percentage.
- Beginning balance: This is the balance you started with at the beginning of the statement cycle (the first of the month, perhaps). Depending on your recent transactions and your return, your beginning and ending balances are usually different. Your balances might also be presented as a chart, over time. In that case, your beginning balance might coincide with the beginning date of that chart.
- Taxable or nontaxable income: If your investments earn interest, this might be noted as taxable or nontaxable income on your statement, depending on what type of account you have. To read more about how your investments are taxed, check out our post on the matter.
Recent transactions: Again, this is pretty self-explanatory. A summary of transactions that have occurred since your last statement may show up here. In the next section, we’ll review the types of transactions usually associated with an investment account. But the summary might show the basics:
- Purchases: Any money coming into your account. Contributions, employer contributions, or rollovers, for example.
- Withdrawals: Any money you’ve taken out of your account. A loan, perhaps.
Your Investments, aka Holdings: Your holdings are the actual products you’re invested in—stocks, bonds, company stock, funds, etc. The holdings may explicitly be listed by ticker symbol on your statement, or they may be presented as a general percentage. Here are a few phrases associated with your holdings.
- Asset class: These are the general types of investments you’re holding. According to Investopedia, there are three main classes: equities (stocks), fixed-income (bonds) and cash equivalents (money market).” Thus, you might see these words on your statement, too, telling you what percentage you’ve invested in each class.
- Asset mix/Asset allocation: Your asset mix shows what type of general products you’re holding. Again, these may be presented as percentages. Or they may be presented as a pie chart. If you’re curious about how your assets should be allocated, the SEC offers a beginner’s guide for getting started.
After the basics, your statement should include more detailed information. Your account detail should include:
- A list of transactions since your last statement
- Your specific investments
- The value of those investments
Let’s take a look at each of these areas in more detail, to see how your statement might display this information.
Your specific investments and their value: Your statement’s summary showed your general holdings. The rest of the statement should show you exactly what those holdings are, beyond their class. Also, you should see the value of your specific investments. Generally, you’ll find:
- Price: The value of your specific investment type. Because the price fluctuates, the statement should indicate the price according to a specific date.
- Share: This is a unit of ownership in a financial asset, as defined by Investopedia. Your statement might show how many shares you have in each asset. It might also show the number of shares involved in a particular transaction. It could show the share price on specific transaction dates.
- Price change: This is the amount your investments have changed in value, usually based on your statement open and close date.
- Volume: The number of shares in a transaction is sometimes indicated as “volume.”
Transaction history: There are a different types of transactions you might see on your investment account. Here are a few of the most common ones:
- Contributions: The money deposited into your account.You might have this automatically withdrawn from your paycheck. Or, maybe you’re lucky enough to have an employer who contributes a certain amount to your account.
- Dividends: Sometimes companies distribute a portion of their earnings to stockholders, and it’s called a dividend.
- Gains and losses: This is kind of like your return. But it shows how much a specific investment has increased or decreased in value. Sometimes, it’s shown as a percentage. If you buy or sell the investment, it’s called a “realized” gain or loss.
- Exchange In and Exchange Out: Your investment plan might be managed by a company that picks specific funds for you. If so, they may decide to exchange one fund for another, and this exchange will be noted on your statement.
Account fees: Your statement might also point out the fees associated with your account or individual funds. It may explicitly be listed as a fee, or it might be called an expense ratio. Or both. Either way, these are the fees associated with your portfolio. If this information isn’t on your statement, you can usually find it by checking your accounts online, or just give your investment company a call.
After showing you detail about your account, your statement might offer a basic analysis of how your investments are doing. Much of this information can already be found in the detailed portion of your statement. But some statements sum it all up at the end to give you an idea of how you’re doing. Generally, your performance will include:
- Rate of return: The amount your investments have increased or decreased in value, based on dividends, gains and losses. Shown as a percentage.
- Investment returns: The amount much you’ve earned from your investments, based on dividends, gains and losses. Shown as a dollar amount.
- Comparison: In some cases, your portfolio might be compared with the market. The investment company might show how your stock style or rate of return stacks up against the overall market. (If your portfolio is underperforming the market, you may want to reconsider how your investments are allocated.)
It’s important to keep tabs on your investments, but as the saying goes, “it’s about time in the market, not market timing.” The idea isn’t to constantly analyze this stuff. The goal is to check in on your investments regularly—every 6 months to a year—and make sure your asset allocation is in line with your goals. If it’s not, the you can adjust. But you don’t want to get caught up in the highs and lows of the market with long-term investing.
Also, these statements can be especially confusing because different investment firms use different lingo and have different ways of presenting your info. But overall, you want to know what you’re invested in, how those investments are doing and how your balance is changing over time.