Wrong book values?

The book value of a stock, bond, ETF or other securities is the dollar amount when it is bought. Usually we buy the same security at different time because we keep adding to it, so the book value is usually an average of the prices at different time when it is bought.

This value is very important especially it is on margin account because it will impact the tax. The book value is half of the equation besides sold value to determine whether it is capital gain or loss and how big the amount. However, this book value can change from capital gain distribution which is out of our control.  That is one draw back of ETF – capital gain distribution. It makes the book value calculation more complicated.

Unfortunately, some brokerages might not update the book value form capital gain distribution properly. From my own experience, TD Direct Investing did a good job to update that, but Questrade seems not. I have to call Questrade to find out why. Is it possible they will take the capital gain distribution when they issue me the tax slip after I sell the ETF? This is not a good practice though. It should be updated ASAP. Otherwise, how can the investor know whether it is a capital gain or loss or what the amount is? They need to manage their tax.

The other strange thing is that the book value of one ETF dropped significantly ay almost $20 after I transfer some units in kind to another account. It doesn’t make sense at all because I kept detailed record of the purchase history. This is in margin account. It will increase my capital gain and thus tax.

It feels necessary to have at least two brokerages so that I can compare and know more. Stay tuned. I will update after I speak to Questrade about this book value.

Published by Worthfy

Financial literacy and counselling

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