Starting to invest can be overwhelming. It’s often a new lingo to us and there is a lot of information out there about it and sometimes it’s even conflicting! There is also risk involved in putting your money into the market. To make investing as stress-free as possible, here are some of the key components to a typical brokerage financial statement and what they tell you about your investments.
The account summary is an overview of the entire brokerage account. It will show the total value of the portfolio which is the total balance of all the funds and investments you own. It may also show the change in your total account value over the course of the period. This will show if your investments grew or decreased in value during the statement period and is an easy way to see if you are up or down. This is also where you will see any contributions you made to the account.
The income summary will show the income you earned on your investments over the course of the period. This is typically from stock dividends or interest income from bonds. A key difference between a retirement account and a brokerage account is that in a brokerage account some or all of the income earned on your investments will be taxable. This means that you will have to declare it and pay taxes on it at the end of the year.
Realized gains and losses
Another way we make money on our investments is if they increase in value. When an investment increases in value it is called an unrealized gain until you sell it and unrealized gains are not taxable. Once you sell the investment for a gain or loss, it then becomes realized and you are now responsible for any taxes. When you realize a gain or loss within a year, it’s a short-term gain or loss and has different tax implications than an investment held over a year, which is called a long-term gain or loss. This section will summarize your short-term and long-term gains and losses and will be very helpful when it’s time to file your taxes.
Holdings and asset allocation
The holdings section of a brokerage financial statement shows the balances of each of your individual investments and will sum to your total balance in the summary. This section will also show how many shares of each investment you own, the market value of each share and your total investment at the time of the statement and typically how much you paid for the investment initially. This section will also show the asset allocation of your investments which is the mix of cash, bonds and stocks. This will be shown as a dollar amount as well as a percentage and statements often provide this information in a chart for easy reference.
Disclosures and additional information
There is typically a bunch of fine print at the end of a brokerage financial statement which discloses information about the brokerage firm, various rules and regulations and how they define certain financial terms.