Article Advocates - Blogging and Content Management System
Welcome!

Commissions are no Big Deal... Period - Part 4

Submitted by Steve Selengut | RSS Feed | Add Comment | Bookmark Me! print

The Commission Virus attacks the cerebral cortex and creates mathematical dementia, an almost true story!

  • After a year of trading, the Investment Manager proudly presented the Capital Gains report which showed an 11% gain on trades equaling approximately $11,000, with an average six-month holding period. 
  • The client fired the manager because his RIA Accountant calculated that the real gain was only $5,800 because he had paid $4,200 in commissions and $1,000 in management fees.
  • How so cried the manager, these profits are after commissions. You are deducting them twice! You'll be paying taxes on the $11,000.
  • Oh, you are right! My real gain is only $2,500!
  • But your account value reads $113,000! (Tell me how for a free book!)
  • Don't confuse me with the facts.
  • Beware the DICV (Dysfunctional Investment Commission Virus). It's out there!

The Day Limit Order Saves the Really Big Bucks... regardless of how you pay the commissions. You may get some resistance, (or be resistant yourself) to using this type of order, but try it for a while and be prepared for some enlightenment, so long as you are using a brokerage firm that guarantees its Best Execution efforts. You will observe:

  • Buy executions at varying prices below the limit you've specified. If you are watching the proper market statistics and numbers, and are asking for complete real time quotes (bid, asked, last), you'll be able to dig deeper below your original buy price for savings far better than the simple discount commission.
  • Sell executions above your limit... sometimes by significant amounts. 
  • Absolutely no unfortunate surprises.

Downside and emergency benefits of the Flat Fee Commission Arrangement:

  • If an issue you hold is downgraded, a realized loss may be changed to a small realized gain if no commission is to be paid.
  • In a down trending market, a small profit or breakeven transaction my produce the cash needed to shop for bargains.
  • In an emergency, the pain of unplanned selling can be eased.

 

Possible Tax Benefits of the Flat Fee Commission Arrangement... maybe (subject to your accountant's advice on the subject):

 

  • A way of removing assets from a retirement program without ever paying any taxes on the money withdrawn. This goes for Investment Management Fees as well. However, the withdrawals must be for charges that are actually associated with services for the account in question.


Click for Details --> Commissions - Part 1 <--

Contact Us
Support and Sales
Contact Us


Associated Articles:
Risk Management: Income, 401k, and IRA Programs - Sooner or later, every investment program (particularly your IRA and 401k) becomes a Retirement Inco...
Financial Services Website Warning Label - Financial Services Website Warning Label...
Seven Principles For Long Term Investment Success - Establish a profit-taking target for every security you purchase. Avoid Unrealized Gains, Embrace Vo...
The Greatest Investment Story Never Told - An excellent strategy even in today's investing environment. The current buzz on the street is that ...
Retirement Ready Income Investing Programs - If your portfolio has less than 40% invested for income, it is far more speculative than you think....
More Brainwashing Book Reviews - My partner and I love this book. We are enrolled agents, do around 800 business, personal, and trust...
The Art of Investing: Working Capital Model based Asset Allocation - This method of looking at things will get you where you want to be without the hype that Wall Street...
Investors Review Their Favorite Investment Book - In the midst of financial crisis, market upheaval, and world-class uncertainty, at least one financi...
What's Inside the Brainwashing Book - The Brainwashing of the American Investor is direct, hard-hitting and brutally honest...The title im...
A Millionaire's Secret Investment Strategy - A Millionaire's Secret Investment Strategy, by Steven R. Selengut, is an Investment Book written by...

Related Tags (related articles): Steve Selengut (66), Commissions (48), no Big Deal (8)