Why You Should Examine Your Broker's Trade Confirmations Carefully
By Joshua Kennon. Investing for Beginners Expert
Thanks to his straight-forward approach and ability to simplify complex topics, Joshua Kennon's series of lessons on financial statement analysis have been used by managers, investors, colleges and universities throughout the world. "If an investment idea takes more than a few sentences, or cannot be explained to a reasonably intelligent fourth grader, you've moved into speculation," Joshua insists. "Whether you're dealing with a public company such as McDonald's, or a private company such as Chanel, these are the types of firms that are easy to understand. You know where the sales originate, what the costs are, and how profits are generated. These are the types of enterprises that aren't going to cause you to wake up in the middle of the night, breaking into a cold sweat because of the sub-prime crisis or esoteric securities trading in illiquid markets. That's a huge advantage to growing your wealth. Focus on what you know, pay a fair price, and invest for the long-term.
When you begin placing trades through your brokerage account with your new stock broker. you will get a trade confirmation mailed to you or emailed to you after entering a buy or sell order.
The trade confirmation is extremely important because it is your way of verifying that the broker has filled an order according to your
instructions. It will also help provide documentation for taxes and gain and loss tracking.
Depending upon your brokerage firm or broker, the information on a trade confirmation will vary, but there are a few things that are included on almost all of them:
- The name of the investment you traded, along with the ticker symbol
- Total shares bought or sold
- The cost or selling price per share
- The commission paid to the brokerage firm. This will not include hidden bond spreads .
- The trade execution date, which shows when the trade was placed.
- The settlement date, which is when the money and investment, such as shares of stock, actually take place. If you have your purchases or sales settled against a bank account, this is the date the money will be taken out of or deposited into your account.
- The total gross value of the transaction.
- The total net value of the transaction after deducting brokerage commissions.
- The account number in which the trade was placed.
- The type of order - market order. limit order. etc.
It is important that you keep accurate copies of all of your trade confirmations. If you notice that the trade confirmation includes information on it that you believe is in error, you must contact your bank or broker immediately to attempt to get it corrected.