How to Keep Investing Expenses Low

The expenses of investing in the stock market can cut into your returns if you are not careful. I already discussed taxes in Chapter 8, which are a major expense if you do not properly time your transactions. Another obvious expense is the cost of doing business with a broker. There are commissions, fees, and other costs (such as extra fees for limit orders). Beyond that, you can rack up plenty of extra expenses that may pay for services or products you don’t need. Here are some of the more common expenses:

Research and analysis. There are hundreds of research services on the web that range from free or inexpensive to outrageous. I have already noted that the premium features of Morningstar are worth the modest fee. Other offerings may cost hundreds of dollars per month. Some are delivered via email, while others come from in-person seminars often at lavish resorts. Be very careful about what you pay for in investing research and analysis.

Investing or trading systems. Every day, at least it seems that way, someone else comes up with a “revolutionary” system that promises triple-digit returns and all types of unbelievable success if you just use their simple system. Not likely.

Hardware/software. You do not need expensive hardware (computers) or software to be successful as a long-term investor. Any relatively new computer will be perfectly adequate and the software you need is available from your broker over the web. If you plan to do a lot of research online (I highly recommend it), consider a broadband (high speed) internet connection if you don’t already have the service. Your local cable company or phone provider can usually hook you up.

Publications/newsletters. There are some good paid subscription publications and newsletters for interested investors. However, there are an equal or greater number for free online. Whether you are considering a paid or free publication, be sure you understand what if anything the publisher has to gain (do they sell financial products and could the content direct you toward a purchase?).

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