Over the years, many people have asked me: Do I need to keep all of the mail I get from mutual fund companies? What can I keep? What can I throw out?
You should keep a few documents, but many can be thrown out.
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You'll also get annual and semi-annual financial reports for the funds you own, which reflect recent and historical performance, and include listings of the fund's holdings as of the report date. The annual report will often include commentary from the fund's manager on the fund's performance and market conditions.
You'll also receive confirmations of your purchases along with monthly, quarterly and year-end statements. They show your holdings and changes in the value of your shares since the last statement date. Also, if you own funds within an IRA, you'll get a statement each year showing how much money you contributed.
Another item to look for is the realized gain-loss (RGL) report with cost-basis information. Cost basis (also called tax basis) is the purchase price of an investment and half of the equation for calculating capital gains. When you sell shares for more than you paid, that's a capital gain. Those are reported on form 1099 and should match the information on your RGL.
Fund companies and custodians keep cost-basis information for their shareholders and clients, respectively. You'll want to keep close tabs on this information so it's available when you sell your funds. You really need the cost basis summary when you transfer shares to a different custodian. Some investors find themselves in a mad scramble the year after they sell shares from a new account because the new custodian doesn't have access to the original cost-basis information. When you transfer funds to a new custodian or advisor, make sure you have an accurate record of the cost-basis information.
You can toss anything that's mass produced or doesn't include your account information. And while the prospectus is an important document for the fund company, most are filled with legal-ese and are not much fun to read.
Here's what you should keep: year-end account statements showing all transactions for that year. When you get individual account information for each purchase, hang on to it until you get your monthly statement that includes transactions from that month. When you get your year-end statement, keep it and toss out the monthly and quarterly statements.
A better option? Sign up for electronic delivery of transactions and statements. Most fund companies and custodians offer it, and it'll help you minimize the paper you have to deal with.
Adam Bold is the founder of The Mutual Fund Store, which provides fee-only investment advice with locations coast to coast. He's also host of The Mutual Fund Show, a call-in radio program broadcast across the country. Bold is author of the book The Bold Truth about Investing (April 2009). Bold is Chief Investment Officer of The Mutual Fund Research Center, an SEC-registered investment adviser, which provides mutual fund and asset allocation recommendations, and research to stores in The Mutual Fund Store system.