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4 reasons to stop relying on your broker’s performance reports

by Angela Thompson, Sharesight

When you login to your broker to check your portfolio performance, do you know what those numbers really mean, and more importantly, what’s missing? Here are 4 reasons to stop relying on your broker for performance reporting:

  1. No annualised total return
  2. Dividends are ignored
  3. Brokerage fees are ignored
  4. Currency fluctuations are ignored

#1 – No annualised total return

One of the biggest ways that brokers fail investors is with misleading performance reporting. That’s because they often only display the difference between the average cost paid for the investment, and the latest market price.

For example, here’s what I see when I login to my broker’s online client portal:

Scotiabank - overview

That 11% return is misleading because it’s really only telling me how I’m performing since the market last closed. As someone investing for the long term, what I really want to know is:

  • How am I tracking so far this year?
  • How does that compare to last year?
  • What’s my overall return, and what impact are dividends having on my performance?
  • How am I tracking compared to the market?

Looking at that table, I have no idea!

#2 – Dividends are ignored

Speaking of dividends, my broker provides a transaction history which outlines the dividend income I’ve made on my investments. Here’s a snippet of that report:

Scotiabank - dividends

In my case, I’ve opted-in to a dividend reinvestment plan (DRIP/DRP) which allows me to purchase shares using the dividend income I’ve made off my investments. I’m therefore buying additional shares at “no cost”, ie: I’m adding shares to my account without having to spend outside money and I’m not paying brokerage fees to acquire them. This factors into my performance, and yet because of my broker’s limited reporting, I have no idea how much.

Regardless of whether I’m reinvesting my dividends or not, the obvious issue is that there’s no running total of these dividends on the report (or anywhere in my broker’s client portal, for that matter). There’s no way to see how much income I’ve made from dividends, let alone understand the impact they’re having (percentage-wise) on my total performance.

#3 – Brokerage fees are ignored

In the current investment landscape of low-returns, it’s really important to keep track of things that eat into your performance. One such component is the brokerage fees you pay to buy or sell investments. A $10 brokerage fee on a $1000 trade might only take 1% out of your actual returns, but it can really start to add up, especially if you’re a habitual trader. And unfortunately – you guessed it – most brokers don’t factor brokerage fees into their performance figures.

#4 – Currency fluctuations aren’t factored

In this case, my investments were purchased with Canadian funds (and are part of my Canadian retirement portfolio) so I’m not being impacted by currency fluctuations. However what if they were purchased in USD or another currency? I’d have no idea how much impact the relatively weak Canadian dollar was having on my total return. Just like dividends, most brokers don’t factor currency fluctuations into their performance figures.

featured - Sharesight Portfolio on iPad

Start tracking your actual performance

It’s only when I started tracking my portfolio in Sharesight that I really began to understand what was going on with my investments. Here’s how I did it:

First, I downloaded my buy/sell transaction history from my broker and uploaded it to Sharesight.

I didn’t have to worry about dividends because Sharesight automagically loaded them for me. While I could have just accepted the automated dividends, I went through each one line-by-line, and adjusted them where required to reflect what appeared in my broker’s transaction history. I found it oddly satisfying to be able to confirm every dividend, and I was amazed to see how accurate Sharesight was. Only a couple dividends were off, and only by a penny or so.

Sharesight - Recent Trades & Adjustments

Once I uploaded my trades and confirmed all my dividends, I was able to run my Performance Report to see my returns over any period and answer those niggling questions I had earlier:

How am I tracking so far this year?
I’m currently down 1.09%: screenshot performance angela 2018

How does that compare to last year?
My return was 10.87% last year: screenshot performance angela 2017

What’s my overall return, and what impact are dividends having on my performance?
Since buying these mutual funds 5 years ago, my total return has been 8.86%, with dividends contributing 9.27% of that return:

screenshot performance angela overall

That led me to wonder how I had performed against the overall market. So I used Sharesight’s Benchmarking feature to compare my portfolio against VCN:TSE, a Vanguard Canadian “All Cap” index ETF. As it turns out, I’m beating it:

Sharesight - Angela Scotiabank portfolio

These are the types insights that really matter to investors but unfortunately aren’t provided by most brokers.

To recap

Unlike most brokers, Sharesight lets you see your total annualised performance over any period. Plus it factors-in crucial components that affect your returns:

Factored into performance?Most BrokersSharesight
Brokerage costsNoYes
DividendsNoYes
Currency fluctuationsNoYes

Other things you can do with Sharesight

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