It's a bit scandalous how bad most investing account statements are.
Too often, they just throw some numbers at you that illuminate your situation only after you hunt down previous statements or grab a calculator to exercise your flabby math muscles. The Investor Education Fund did an on-line survey recently and found that 70 per cent of respondents believed their statements were incomplete or hard to understand. Some day, investors will vent this frustration on their brokerage, financial planning firm or fund company, and statements will improve. Until that happens, it's worthwhile making a trip over to the Investor Education Fund's website at www.investored.ca to look at its new section on understanding investment statements.
The fund is an offshoot of the Ontario Securities Commission, and it's well financed with money from settlements made by firms and individuals targeted by the regulator. The new section on understanding account statements was created with the help of Dalbar Inc., a financial services research firm that specializes in measuring the effectiveness of investing account statements.
The tutorial on understanding your statement begins with an overview of exactly what information you can expect on brokerage, mutual fund and registered retirement savings plan accounts. If you're an investing novice, you'll find this feature quite useful, because it adds some depth to the sea of unexplained numbers you'll find on many statements.
Investors of all experience levels should take a look at the website's list of things to check on your statement. In addition to basics like making sure your address is right, it's also recommended that you check to ensure your opening balance corresponds to the closing balance from the previous month or quarter, that cash deposits and new contributions were properly credited and that any automatic withdrawals from your account were processed on the correct day. For registered accounts, it's suggested that you check to ensure your foreign content is below the 30-per-cent ceiling, and that you have identified a beneficiary for the account in case of your death.
The education fund addresses a statement-related issue that continually bothers investors, which is calculating rates of return. While simple rates of return are easily figured out, things get tougher when you're making regular contributions or withdrawals from an investment account. To help clarify things, the fund has provided a simple on-line calculator that you can use to provide an estimate of your rate of return, including contributions and withdrawals. There's no doubt that a lot of investors will turn to this calculator over and over to help them understand how they're doing.
The account statement tutorial also covers the impact of fees on your returns — now there's an issue you don't see addressed in the vast majority of account statements — as well as the importance of asset allocation. This sounds like basic stuff, but if it's so simple, then why isn't it covered in full on your account statement?
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