According to FINRA Rule 2340, general securities members must disburse account statements at least once every calendar quarter. The account statements informs you as an investor because you can evaluate the quarterly performance of your investments. Evaluating your investment performance requires you to consider your rate of return and your yield.
Rate of return is the total amount of money earned or loss on your investment. When evaluating your rate of return, you should evaluate both the total return and the percent return. The up or down change of value from the time you purchased the investment plus the income collected from interest or dividends on that investment equals the total return. Determining the percent return, entails dividing the change in value plus income by the amount you invested.
A yield is the income an investment pays during a specific period (normally a year) divided by that investment’s price. Typically yields are expressed as percentages. Yield on bonds means the return on the capital you invested in the bond. The most basic bond yield is the coupon yield which is the amount of income you collect on a bond, expressed as a percentage of your original investment. To determine Yield on stock, divide the year’s dividends by the stock market price. Chasing yields can be risky – sometimes struggling companies will issue dividends to shareholders while experiencing financial setbacks. The financial institution selling a CD usually determines a fixed rate as the yield on CD.
Sometimes investments are known as capital assets. When you sell a capital asset the difference between the sale price and the asset’s adjusted worth earns a capital gain or a capital loss. You realize capital gains when you sell capital assets for a higher price than the adjusted worth. You realize capital losses when you sell capital assets for less than adjusted worth. With a few exceptions, capital gains are generally taxable. Profits earned from selling an asset held for more than a year are considered long term capital gains and are taxed at a rate lower than your ordinary income. Short term capital gains—gains earned from selling assets held for less than a year—are not taxed at the same rate as long-term capital gains. Short-term capital gains are taxed at the same rate as ordinary income.
Being an informed investor means you remaining alert to the latest changes and development in the investment world. FINRA’s Investor Alerts site issues alerts to inform you about the latest investment trends.
Now test your knowledge – can you complete the crossword puzzle?
Staying Informed and Evaluating Investment Performance
7. Investments are sometimes known as __ __ (2 Words)
8. Follow FINRA’s ___ ____ page to keep up to date on the latest changes and development in the world of investments. (2 Words)
9. Calculated by dividing the year’s dividends by the stock’s market price (3 Words)
10. __ __ ___ is normally a fixed rate determined by the financial institution selling the product (3 Words)
11. Profits you make selling an asset you held more than a year. (4 Words)
1. The rate is calculated by dividing the yearly interest payments by the par value. (3 Words)
2. ___ ___ ___ ___earned from selling assets held for less than a year are usually taxed at the same rate as your ordinary income. (4 Words)
3. If you make money by selling one of your capital assets for a higher price than your purchase price, you have ___ ___. (2 Words)
4. FINRA Rule 2340 requires all securities members to disburse ____ ____no less than four times a year (2 Words)
5. When you lose money on the sale of a capital asset. (2 Words, plural)
6. When considering your __ ___ __ you’ll want to evaluate both the total return and the percent return. (3 Words)