Apr 11 2006
Things to Consider About Costs to Run Your Porfolio
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Investing can be as cheap or as expensive as you which to make it. Depending on your investing requirements you may be able to choose from a wide variety of sources of investment services and/or advice.
My personal choice is trying to minimize my costs completely, by doing all my own research and keeping my buying (and selling) commissions way down. This is what I am comfortable with. You may have different requirements and wants. To sum up the choices you have, I have prepared the list of options available to most investors:
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1. DIY Investing – these investors choose the discount brokers and tend to do the equity research on their own, or supplement their research with a few newsletters or paid research reports here and there. One thing to watch for is the number of freebies like research reports, trades, and access to other services. Don’t be too overwhelmed by these services however – I think it is usually better to go with the cheapest broker you can find as they all tend to do the same in terms of service and functionality.
2. Full-Service Broker – on the other end of the spectrum is the Full-Service Broker who charges you for the research, and buying and selling securities, mutual funds, etc. They most work on commission, making a good portion of their money from the buying and selling of investment vehicles. These guys (and gals) provide advice and recommendations on how to structure your portfolio and what stocks/bonds to buy. Good if you want to be totally hands off of your portfolio, but expensive when compared to discount brokers. Find a real good full-service broker can be tough too as they are a dime a dozen.
3. Asset Based Fees – these types of investment counselors charge investors a percentage fee based on the value of the assets in the account. It essentially is a flat-fee type of structure as opposed to paying commissions each time you buy and sell. These types of brokers still handle the buying and selling, but do not charge you commissions every time they do so. Of the full-service broker and the asset based broker, I would tend to lean towards the asset based structure as there is less incentive for a broker to “churn” your account.
4. Fee-Only Planners – fee only planners do not actually carry out the investing transactions. They provide you with advice and recommendations, but you have to do the transactions yourself, through a broker of your choice. Some charge by the hour, and some by the value of your portfolio.
To my knowledge, these are the primary types of fee structures a dividend investor must consider when deciding how to invest.
