Will Trice wrote:
- quote -

It's true that anyone choosing to own stock must live with these costs,
either directly or through the fund they own (I'd throw in "market
impact" too, changing the stock price because of your trading). But how
much of them you take on depends on how often you trade. For a mutual
fund, these costs become much more significant if the turnover is high.
The manager needs to not only pick winning stocks, but pick winners that
will also overcome these trading-related hurdles. I've seen studies
estimating this cost to be in the 3% range, higher for some categories
of stock. If you change the composition of a stock portfolio on average
4 times a year, it's much more of a cost to "beat" than if you do so
once every 4 years.

Will, you're right that commission/exchange costs are fairly uniform
(especially on a per-share basis) but that's a minor piece really,
measured in pennies per share. The average mutual fund manager's trade
is pretty big and feeding those larger block orders into the market is
going to have an impact that a 100-share order won't. This is an area
where a small investor, arguably, has an edge.

-Tad

catalpa wrote:

- quote -

This is true, while SEC fees are not based on market cap, bid/ask
spreads seem to be correlated to a company's size. It is difficult for
me to consider the bid/ask spread as an expense, although I know that it
typically is considered as such. If I get the price I want (i.e. I
didn't use a market order), then where's the expense to me? I know that
I theoretically could have gotten a better price (unless I happen to
make a direct trade over an ECN, but I don't know how likely that is),
but isn't that true with everything I buy or sell, not just investments?
Is the difference between the retail and wholesale price of beer an
expense levied on me or just part of the cost of the beer? I guess if
it's part of the cost then it's an expense. Wait, I'm confusing myself.
Let me go get a beer and I'll get back to you...

-Will

"Will Trice" <wwtrice[at]paragondynamics.com> wrote in message
news:4645DB20.7030108[at]paragondynamics.com...
- quote -

A fixed broker commission does not make all your transaction costs
identical. Transaction costs include broker commission plus the bid/offer
spread plus SEC fee on sales. As the bid/offer spread varies so will your
transaction costs.

On May 12, 9:53 am, vjp2...[at]at.BioStrategist.dot.dot.com wrote:
- quote -

The ways which even honest brokers are encouraged to raise revenues
from their client are manifold and devious... these people are *not*
compensated on the basis of how their client performs, but on revenue
per client.

It's getting worse too. My father's broker has retired, and I can see
his successor is under much more pressure to raise the revenue from
the account.

- quote -

Also houses aren't 'marked to market', so there isn't the tendency to
try to trade.

- quote -

The only thing that really hurt you was that taxes were quite high on
dividend income, although this was more after WWII-- before WWII
incomes were so low not many people paid income tax.

It's the short-term investor who gets screwed. And usually
- quote -


There was a piece in the New York Times by Hal Varian, an economist at
Berkeley who writes very well and clearly (I think it's behind the pay
for wall).

Basically someone has tracked what stocks return, vs. what investors
actually get, using the 'money weighted' flows. The difference is
something like 4% per annum over the long run.

That is 4% that is accruing to brokers and to those who hold funds and
stocks for the long run, against those who trade.

vjp2.at[at]at.BioStrategist.dot.dot.com wrote:

- quote -

Yes I would be surprised. As an all-stock investor, I pay the same
amount of transaction costs for any stock I buy or sell. Unless you're
talking about stocks on the pink sheets or something...

-Will

Kinda off topic, but be careful of fees. My dad had a mutual fund which
reinvests dividends (saw cum 30%/yr ca 1989). Broker then wanted me to put
this fund under account. Guess why? Then he gets a comission of reinvested
dividends. As is, no fee because done by fund. Of course, the brokers are
quick to call this fund (one of the oldest and best) a "dog".

The smaller the stock, the more of your profits get eaten away with
transaction costs. You would be surprised how much. One of the reformed
netalysts was on the radio saying the reason folks loose less money in real
estate than stocks has to do with the fact that they don't sell their house
as much as they sell their stocks. Quite true. You have to move out.

The value of leaving an investment alone is underrated. Even in the
height of the Great Depression, no one lost money if they kept stocks more
than two decades. It's the short-term investor who gets screwed. And usually
by his fee-grubbing broker.

- = -
Vasos Panagiotopoulos, Columbia'81+, Reagan, Mozart, Pindus, BioStrategist
http://ourworld.compuserve.com/homepages/vjp2/vasos.htm
---{Nothing herein constitutes advice. Everything fully disclaimed.}---
[Homeland Security means private firearms not lazy obstructive guards]
[Urb sprawl confounds terror] [Remorse begets zeal] [Windows is for Bimbos]

"nomail1983[at]hotmail.com" <nomail1983[at]hotmail.com> writes:

- quote -

They are always reported after the operating expense
have been taken out.

Recently, fund companies have started reporting more
theoretical total returns - after *sales* expenses
and some assumed rate of taxation, too. (Not all
funds, of course, have any sales expenses)

--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
Are you posting responses that are easy for others to follow?
http://www.greenend.org.uk/rjk/2000/06/14/quoting

On May 11, 3:57 am, "nomail1...[at]hotmail.com" <nomail1...[at]hotmail.comwrote:
- quote -

Yes. Operating expenses, including the expense ratio and transaction
costs, are deducted.

Dave

When a fund prospectus shows historical "total returns",
I believe they include dividend and capital gain distributions
as well as changes in net asset value.

Do "total returns" include fund operating expenses, aka
the "expense ratio"? That is, are fund operating expenses
deducted from returns?