Cashflow statements for investments look a bit different than cashflow statements most people are accustomed to seeing for investment activities as they relate to a business or corporation. It is essentially a ‘flash report’ which gives a snapshot of how funds are performing. They are designed to demonstrate to the user how transactions have affected the ending market value (EMV) on each account or portfolio since the prior month.
They can contain several attributes depending on the type of investments represented or the reporting layout. Primarily it must show: (1) beginning market values (BMVs), (2) EMVs, (3) earned income, (4) dividends, and (5) interest paid on each holding. The vertical totals usually show combined market values of all portfolios being reported, with the horizontal list of totals that show: (a) BMV, (b) earned income, (c) fees, (d) capital appreciation (depreciation), and the (e) EMV of each portfolio.
Brokerage accounts contain one or more fund products (usually mutual funds), cash and/or money market holdings. Interest is earned on cash and is transferred to principal cash. Dividends are earned on money market funds, stocks, mutual funds, and separately managed accounts (SMAs/SAs).
When dividends are not reinvested, the earned capital shows as a capital depreciation (negative) because it leaves the fund, is offset to cash, crediting the cash account. Reinvested dividends create a cashflow of $0.00 since the payment is used to purchase new shares of that mutual fund. You know how well the investment has done by simply identifying the ticker symbol and looking up the share price performance for the month you want. If you want to see the total of cash that has left the accounts over the course of the month, you would look for the total flows on the statement. It should be easy to identify.
Custodians charge fees to administer money market or brokerage accounts. Fees are usually charged quarterly and should not vary much if your investment activities have not changed. These are administrative fees. Investment manager fees are periodically charged on SMAs as these are actively managed funds. If there is not a total of fees column on your cashflow statement, you should be able to locate a description of each fee in the list of transactions. Balance your checkbook!
All of these are activities that affect the availability and use of cash in your investment portfolios, and it’s important to understand how non-cash accounts impact cash and are reported in cashflow statements.