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Important and Useless Financial Paperwork

This article provides you with information on which paperwork you should keep and which to destroy. Due to the many regulations that mutual funds are subject to, investors are plied with tons of documents. It is sometimes hard to swift the useful ones from those that should not be kept. The financial industry is characterized as the one with the most paperwork and every mutual fund is required by law to inform its investors of every detail.

Important Documents

Computers have alleviated to a great extent the amount of paperwork you should keep. This is thanks to the ability of your broker or fund company of reproducing any document you have lost. They keep comprehensive databases that are secured through backups, which in turn have their own backups. Despite this, always have in mind that breakdowns in the system are not eliminated, so secure yourself by keeping the following paperwork:

  1. Year-End Statements

    Generally, it is advisable to keep year-end statements for 3 or more years. This is so, since the IRS (Internal Revenue Service) can audit your investment. The exception of the three-year rule is the case of you committing a tax evasion or other type of fraud. If you get into such a situation, you should keep the year-end statements for at least 5 years. 

  2. Trading Confirmations

    In order to be able to estimate the cost basis of your mutual fund, it is desirable to keep the trading conformations for until you decide to sell the stock or fund plus two additional tax years. This is true only for taxable accounts. In the case of non-taxable accounts, the trading conformations are just a means of keeping you informed about what is going on, so it is up to you whether to keep them or not.

  3. Stock Split / Merger Notices

    Stock Split and Merger Notices should not be destroyed only for those accounts that are subject to taxes.

  4. Contributions

    You should the paperwork about:

    • IRA contributions
    • Your retirement plan
    • Non tax-deductible contributions
  5. 401 (k) Plan Rollover Information

    Rollover represents the act of transferring to another institution that is responsible for the management of your pension plan without incurring any tax penalties. Therefore, you should be able to prove the rollover in case any suspicions on your large IRA balance arise.

Unimportant Documents

  1. Marketing Materials

    Many companies mail lots of marketing brochures in the hope of attracting you to their additional services. This spam mail is quite annoying so call your company and ask them to stop sending you this junk mail. In case they don't take under consideration your wish, you can always address the SEC.

  2. Monthly and Quarterly Statements

    In case you have lost other important documents, such as notices or trading confirmations, use the monthly and quarterly statements as backups. Destroy them after a year when they have served their purpose.

  3. The prospectus

    By law mutual funds are required to provide their investors with a prospectus before making the investment. The first prospectus that you receive is of greater importance than the later versions, since you can keep track of what you have been "promised" at the time you made the investment in the mutual fund.

  4. Letters

    Financial companies like sending letters apologizing about negative returns. They also like advertising their new services by letters. Don't hesitate and get rid of these letters, because they have no impact on your profits.

  5. Annual and Semi-Annual Reports

    Read them through and then burn them. Make sure that they don't contain disturbing information on the condition of your portfolio.

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