My Personal Finance Journey

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What's My Total Investment Cost in 2007?

Contributed by mm | January 9, 2008 1:44 AM PST

6354-money.jpgI started to use personal finance software like Microsoft Money to track my finance as early as 1998, but admittedly I have a broken track record -- in my first few attempts to gain control to my finance, I was always too lazy to keep doing the bookkeeping after a few months. Still, I'm proud of my latest streak: since 2002, I have been religiously tracking where my money comes and goes, and I have six years' of history in my Microsoft Money file now. Of course, opening the book to public eyes in this blog is an important motivator (or pressure) to extend the streak.

While I can easily give a detailed breakdown of how much we spent for our earthy needs, I have never asked myself the question: how much did I spent on investing my money?

That is, until today, when I have both the inspiration and time to get to the bottom of this question. So below is my attempt to add up all investing cost, direct or indirect, in the year of 2007.

First component of my investing cost is, of course, commission.

Since I keep good track of all my investment transactions, I easily got the line-item details from Microsoft Money's built-in report. I grouped total commission for different investment vehicles for clarity:

Stock: Total Commission = $170.66 from 21 transactions (average per transaction is $8.13, including the usual $8 commission from Fidelity, and SEC fees on stock sales). Yes, I only traded 21 times in my individual stock positions -- I'm not really a trader.

China Mutual Funds: Total Commission = $73.10 from 7 transactions. These are the back-load charge for unwinding my China equity market mutual funds in the first quarter of 2007.

Employee Stock Programs: Total Commission = $46.21 from 5 transactions, including the quarterly sale of ESPP stocks, and exercise of stock options in November.

Total Commission Cost: All the above three categories add up to total commission cost of $289.97.

The second component of my investing cost is my paid subscription to certain publications.

I have free access to quite a lot of research reports from my brokerage accounts with Fidelity, Citigroup's Smith Barney (via employee stock option program) and Ameritrade, so I have been quite picky in selecting paid subscriptions. Actually, I only paid for two such sources in 2007.

The first is Morningstar Premier membership, which costs $145 a year. Since becoming a paid subscriber in 2005, I have been more than happy with the service: Morningstar is the undisputed leader of mutual fund analysis, and it also offers good stock analysis on more than 2,000 issues using a value-investing approach that fits my philosophy very well. Highly recommended.

In addition, in 2007 I tried the $99 paid subscription to Motley Fool's Stock Advisor, a monthly stock-picking newsletter. It has quite good track record, but I'm not very impressed. Perhaps the two-recommendation-a-month frequency and its small-cap focus is a bit too overwhelming to me. Most likely I won't renew the subscription in 2008.

Besides the free research reports and paid subscriptions, I read the three major personal finance magazines (Money, SmartMoney and Kiplinger's Personal Finance) too, but the subscription is paid in miles from my Northwest WorldPerks account.

Total Subscription Cost: $145 + $99 = $244.

Apart from commission and subscription, both are direct cost, I recognize that I incur indirect cost in my mutual fund holdings. It is inherently difficult to accurately report on the total cost I paid on these mutual funds, though. Also, these costs are subtracted before I reported my performance against benchmark, so it is not that important to know the exact cost I paid. All I can say is, based on Morningstar's data, almost all my mutual funds have lower-than-average expense, so I definitely didn't overpay.

So all in all, to answer the question I asked myself at the beginning of the post, my total investment cost in 2007 is $290 + $244 = $534.

To put this into perspective, in 2007 my average portfolio size is about $830,000 (including self-managed account and employee stock option account), so I only paid less than 0.07% of my portfolio to keep it running. Plus, with the benchmark-beating performance of my portfolio, it is probably the best $534 I spent in 2007.

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This Post Has Received 5 Comments. Share Your Opinions Too.

Xias Commented on January 9, 2008

Hey there MM,

Have you tried Zecco as a means for lowering your investment costs? Personally I've done well with them, but I've heard mixed reviews of their customer service (who I've yet to deal with).

Srini Devineni Commented on January 11, 2008

I was going through your investment cost and noticed that you paid $145 for Morningstar Premier membership, If you subscribe to this through Fidelity you get 34% off of the subscription fee. This is how you get there. Once you login to your Fidelity account, click 'Research' tab and then 'Stocks' tab. Now on the left side of the page you'll see 'Analyze Stocks' section. In that you've 'Research Offers' in which you've Morning Star offer.

Morningstar Premier membership:
One-year subscription regular rate: $159
Discounted Fidelity customer rate: $105
You save: 34%

By the way, I like Stock investor report at Morning Star.

MM Commented on January 12, 2008

Woo, this is a great tip! Thank you Srini!

I have been with Morningstar for three years and they have raised the price from $125 to $135 to $145. Guess I can finally control my spending here during the next renewal now.

Alex Commented on January 15, 2008

I think you should include this expense in your overall portfolio return numbers. Although 0.07% is very low, this should still be included if you want see your true return.

MM Commented on January 15, 2008

Alex, the commission is already baked in before calculating portfolio returns. The subscription cost? I may but again it is splitting the hair.

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