Investing 101: Updated and Expanded

Chapter 15. HOW TO FIX YOUR BROKEN RECORDS

Barbara knows exactly how much she paid for one hundred shares of stock way back in 1962. It's what's happened since then that she is fuzzy about. That's because she's been reinvesting dividends for the past twenty-six years. She never stopped to calculate how much extra money that amounted to. But now that she's considering selling the stock, she's in a quandary.

Going through twenty-six years of records to tabulate her total investment, including reinvested dividends, will be a horrible—maybe even impossible—job. But if she doesn't do it, she may pay too much in tax.

Her story is by no means unique. Investment professionals maintain that record keeping is one of the most important and most widely ignored steps in wise investing. Good records help you monitor your portfolio and help you determine when to buy and sell. They're also pivotal when you're determining how much tax you have to pay. And they can signal whether something is wrong with the way your broker or other financial advisers are handling your accounts.

Record keeping is the financial equivalent of getting an annual physical, experts contend. It helps you keep up with fees and performance, and can save you a fortune if you pay by the hour to have your tax return professionally prepared.

Yet many investors fail to do it because the process can be ponderous. But it doesn't need to be. If you start early and do it right, keeping good records will save you time and money—and won't ...