The ABCs of understanding your investment statements
In 2017, the Canadian Securities Administrators imposed new requirements for the disclosure of mutual fund statements and fees. All mutual fund advisor clients must now receive regular statements containing all information deemed essential, at least once a year, and every month or quarter (as applicable) when transactions take place.
Account statements for dummies
Let’s look at the contents of your typical mutual fund participant’s account statement. You will find a summary, which lists the transactions made during the period; your asset allocation, which is the proportion of your money allocated to different types of investments; your detailed portfolio, which outlines your investments with their market value (their market price at the end of the period) and, if applicable, their book value (their cost at purchase); and finally, the transactions made in your account during the period (purchases or sales of units, interest paid, dividends paid, etc.).
Your annual statement is particularly important because it is a report on the performance of your account since it was opened and over a period of one, three, five or ten years. It also shows the fees paid to your advisor, either directly by you or by mutual fund companies in the form of commissions. Note that fund management fees include both the fees paid to your advisor as well as to other stakeholders (managers, financial institutions, administrative services, and others).
The objectives behind the numbers
If you are struggling to comprehend your account statements on your own, the exercise can prove overly difficult, especially since they need to be put in the context of your financial goals. Indeed, your account statements will be interpreted differently if you plan to retire in five or fifteen years, for instance. Additionally, considerable fluctuations in the market value of your assets may trigger strong immediate emotions, which could overshadow your long-term strategy.
Why not learn how to analyze your statements with your advisor? Ensuring that you have a good understanding of the products you have chosen is part of the role of every professional member of the CSF. Be sure to enlist the help of your advisor! It may also be an opportunity to adjust your asset allocation or update your strategy, as events in your life unfold (changes at work, personal projects, birth, and so on).