Are you not opening your investment statements that come every month? This article provides quick tips and guidelines to understanding your investment statements.
Have you ever said: "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 suggest opening your statements, I realize that they can be difficult to read. With the new tax laws, this is especially important. Here is a short exercise (half an hour) to help investigate your investments and gauge how your portfolio really is performing. Isn't half an hour worth many hours of restful sleep? I think so!
Try this out on your most recent brokerage statement, 401k, IRA or regular investments.
1) "WAITING TO COME BACK STOCKS". Circle your stocks and mutual funds that are "waiting to come back". First, do a financial check-up and decide to keep or sell them. Then, write a price next to them where you would be willing to sell. You should always have a price that you would be willing to sell your stock at. Therefore, when the market comes back (and it will!) you are prepared for it. This exercise alone helps focus your financial path forward.
2) WHAT IS THEIR INVESTMENT TYPE? For your stocks, mutual funds and bonds. Are they small-cap growth, large-cap value or corporate bonds (just to name a few)? Do you have too much in one investment type ("I didn't realize I had 80% of my portfolio in Large-Cap Growth!"). This is so important to do – especially for your asset allocation. In addition, with the new tax laws, you will want to complete this exercise to make sure you are paying as little taxes as possible on your investments.
3) COMPARE YOURSELF TO THE MARKET. Instead of "I'm losing so much money!", do a checkup. Visit www.morningstar.com for your mutual funds. Evaluate how your mutual fund is performing compared to similar funds. You can do this by looking at the +/- category line in the returns box. This line tells you if your mutual fund performed better or worse than similar mutual funds. Also, take this time to write how many Morningstar stars your mutual funds merit (1 through 5 with 5 being the highest rating).
4) MY MONEY MARKET IS EARNING WHAT?! 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 www.bankrate.com for a higher interest paying money market or look for an Ultra Short-Term Bond mutual fund elsewhere.
About the Author
Galia Gichon, Founder of Down-to-Earth Finance, provides unbiased financial education. Galia Gichon has more than a decade of experience in financial services and an MBA in finance. She speaks regularly at corporations, professional organizations and works with individuals. She publishes a monthly e-zine "Down-to-Earth Finance" with tips to spend smarter and save money and time on your finances. Subscribe at DownToEarthFinance-On@zines.webvalence.com. Contact her at 212.734.0433 or www.downtoearthfinance.com.
