Added: 03/21/2006 |
Stock record - brokerage order and safetyA stock record, in fact, is a system that helps brokerage firms keep track of the position and physical location of the securities they are holding. That process of arranging firms is rather important to avoid frauds in market trades; actually, knowing stock records allows to be sure in what you invest in.
A stock record is used by brokerages or a company itself, when the time of paying dividends comes. This is a date, on which a company looks at its records to see who shareholders of the company are. An investor must be listed as a holder of record to ensure the right of a dividend payout. The ratio of shareholders and securities displays the real situation on the whole of the dividend to provide. As mentioned, if you are not in the company's record books on the date of record, you will not receive the dividend payment. To ensure that you are in the record books, you need to buy the stock at least three days before the date of record, which also happens to be the day before the ex-dividend date. The ex-dividend date is a date the security trades without its dividend. If you buy a dividend, paying the stock one day before the ex-dividend, you will still get the dividend, but if you buy on the ex-dividend date, you get nothing. The ex-date is the second business day before the date of the stock record.
If you consider buying stocks, you should remember that brokerages will protect you from the additional headache, but you should also mind that brokerage services are not free. You always pay commissions and may also pay transfer fees, when changing brokerages. These expenses should be added to the amount you paid for a stock, when determining your cost basis. In case you sell the shares, consider also the commission from the sale price of the stocks. Think of these costs as a write-off, as they are direct expenses, incurred to help you make your money grow.
When included into the stock record of the brokerage, remember that every fee and transaction costs represent your personal money, there is no reason to avoid claiming every expense possible, when filling your taxes. Be sure also that you have used every discount possible, suggested by brokerages. As a rule, you will be asked to pay relatively low fees that do not usually have a material effect on your returns.
Some countries like Canada use brokerage street names, when improving the economical situation of its regions. For instance, since recently, you can get tax credits in Canada, when spending your income on certain investments into provincial economies. This plan of tax credits is called a stock savings plan and is implied among brokerage firms hold shares in the street name for resident investors.
The tax management is an integral part of any successful financial plan. Ensuring in actively taking advantage of tax avoidance opportunities and making sure you do not overlook any expenses or other income-reduction techniques that can reduce your taxable earnings, you will note a considerable healthy boost to your annual return.
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