I 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.