Keeping Costs Low

It’s quiet at the moment in our portfolio, and that’s how we like it. Only the brokers benefit from buying and selling, in other words frequent trading. We prefer to keep our money instead of making others rich.

Even with low cost brokers you incur maybe USD 3.00 of transaction fees. If you trade too often this adds up. We endeavor to keep our cost at no more than 0.04% of assets value. Vanguard charges this amount for their S&P 500 index fund (VTI). In 2017, our costs were greater than 0.04% of assets as we had restricted our portfolio at the beginning of the year. For 2018 we are planning a ratio of better than 0.04% given available information.

There is no need to throw money at funds who charge you a management fee of 1% or more of assets. Even if they can prove they beat the index, e.g. S&P 500, every year for 10 years or more, there is absolutely no guarantee they will do so in the future. Also, when you look at their performance, always make sure you compare it after all fees, charges and tax.

Our last trades wer in December 2017 when we sold some Apple shares (AAPL) and added Genuine Parts (GPC) instead. We sold Apple as it had a very good run over the last year, so we realized some of the gains. We kept some of the Apple stock as we continue to be optimistic about the company.

We added GPC for several reasons. Firstly, they have increased their dividend each year for over 25 years. With the additional value the number of holdings increased to 29 positions further reducing the risk associate with any particular stock. Of those that we have on our buying list GPC was the cheapest one in terms of price/earnings (P/E) ratio.

Mental note: Pick stocks that you intend to keep for a very long time as in “forever”, in other words: You have no intention of ever selling the entire position. At best you may sell some to realize a gain or by more to get a better average cost per share. Then sit back and wait. 

Happy investing!

Disclosure: We own shares of AAPL and GPC.