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Innappropriate Investments
Comments
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i've already said the articles in the investors chronicle and guardian are new. why are you going on about a 12 year old document?
An indication that you neither read nor understand the 'evidence' that you provide.it's funny when you read the posts here, you get a picture in your minds eye of what the posters are like. to put it delicately as i can, i'd imagine you'd be the type of guy who sits alone at the staff christmas party. I bet you work in IT?
Typical of you usual response when you are desperate. Yawn.Living for tomorrow might mean that you survive the day after.
It is always different this time. The only thing that is the same is the outcome.
Portfolios are like personalities - one that is balanced is usually preferable.
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Ark_Welder wrote: »Typical of you usual response when you are desperate. Yawn.
you stay with your mum?
laters anway, i'm off to bed.0 -
.
i'm just a copy/ paste merchant here.
"A Financial Services Authority (FSA) report* authored by Kevin James undertook to quantify the costs of trading to determine the performance drag. He concluded that the cost of a “round trip” trade in the UK was 1.8%. A “round trip” is the selling of one company’s shares and replacing them with another for the same value. For example selling £10,000 worth of Barclays’ shares and replacing them by buying £10,000 worth of HSBC shares.
Let’s look at a breakdown of the costs:
- Commission 0.3%
- Bid/Offer Spread 0.75%
- Price Impact 0.25%
- Stamp Duty 0.5%"
http://www.medicaldentalfs.com/portfolio-turnover-the-hidden-cost-of-active-management/
It shows! It really does!
From the very same article that you quote, the following are the notes that relate to the asterisks in the article:
An example of how you cut-and-paste without reading and understanding.*Financial Services Authority (FSA) Occasional Paper 6
**Wilcox (1993) 1.2%, Carhart (1997) 0.95%, Orton (1999) 1%, James (2000) 1.3%
***Performance of Mutual Funds, J Chalmers, R Edelen & G Kadlec Nov 1999Living for tomorrow might mean that you survive the day after.
It is always different this time. The only thing that is the same is the outcome.
Portfolios are like personalities - one that is balanced is usually preferable.
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And you don't think the newspapers have any bias?
they obviously have a bias to write a good story, however they also have a bias not to p1ss the advertisers off.
the financial industry spends a lot on advertising, the newspapers aren't going to do too much to expose the financial industry. i can well imagine a few fund managers phoned up the editor of the guardian after that article....0 -
Ark_Welder wrote: »It shows! It really does!
From the very same article that you quote, the following are the notes that relate to the asterisks in the article:
An example of how you cut-and-paste without reading and understanding.
ehhhhmmm, you mean the FSA was wrong about the cost of 1.8% for a "round trip"? are you an accountant/ analyst or someone with the knowledge to criticise the FSA?
how about contacting someone with the power to make the FSA see things your way instead of posting your thoughts here.
I managed to dig out a few contact emails for you. These people should be able to make the FSA see things your way.
the Queen - [EMAIL="HerMajesty@buckingham.palace.co.uk"]HerMajesty@buckingham.palace.co.uk[/EMAIL]
Duke and Duchess of Cambridge - [EMAIL="WillsandKath4eva@hotmail.co.uk"]WillsandKath4eva@hotmail.co.uk[/EMAIL]
Tony Blair - [EMAIL="Imacompletetossah@gmail.co.uk"]Imacompletetossah@gmail.co.uk[/EMAIL]
Gordon Brown [EMAIL="Ihatetony@aol.co.uk"]Ihatetony@aol.co.uk[/EMAIL]0 -
That reports uses pricing from 2000 and can be read here. It was outdated and badly high in prices as soon as 2001."A Financial Services Authority (FSA) report* authored by Kevin James undertook to quantify the costs of trading to determine the performance drag.
He my have been right in 2000 but he's not today. For a more realistic but still old number try "Total transaction costs on the London Stock Exchange were 0.72% including stamp duty in 2001Q1, according to London Stock Exchange (2001)" (page 8 footnote 14). So less than a year after that paper the LSE was giving far lower costs than it gave.He concluded that the cost of a “round trip” trade in the UK was 1.8%. A “round trip” is the selling of one company’s shares and replacing them with another for the same value.
if he gave those trades as an example I was unable to find them in a search of the document.For example selling £10,000 worth of Barclays’ shares and replacing them by buying £10,000 worth of HSBC shares.
That's broker commission that the fund pays. (page 28). IFS: "Average commission rates on UK shares are between zero for large institutional trades and 5% for the smallest private trades, with a weighted average over all trades of 0.17%" (page 8 footnote 13).Let’s look at a breakdown of the costs:
- Commission 0.3%
"The turnover weighted average spread on the London Stock Exchange is about 75 bp.(30)". Not any more it isn't, after deducting the stamp duty it was 0.22% by 2001 (the 0.72% above less 0.5%).- Bid/Offer Spread 0.75%
I suppose this might still be true, didn't go looking for more recent data.- Price Impact 0.25%
Still the same so at least the report isn't obsolete on this number.- Stamp Duty 0.5%
Of course, I'm quoting from a 2001 paper and prices have dropped since then as well.
So you're using a 2007 blog post that's citing a 2000 paper that had badly outdated pricing even a year after publication. You can do better than that, please try. There are probably some more recent numbers in one of the reports of the Turner Pensions Commission.
Ark Welder commented on this post, just as I'm doing, because you brought that obsolete report up again. Why not stop using obsolete data when you've been pointed to something more recent?0 -
That's broker commission that the fund pays. (page 28). IFS: "Average commission rates on UK shares are between zero for large institutional trades and 5% for the smallest private trades, with a weighted average over all trades of 0.17%" (page 8 footnote 13).
"The turnover weighted average spread on the London Stock Exchange is about 75 bp.(30)". Not any more it isn't, after deducting the stamp duty it was 0.22% by 2001 (the 0.72% above less 0.5%).
I suppose this might still be true, didn't go looking for more recent data.
Still the same so at least the report isn't obsolete on this number.
Of course, I'm quoting from a 2001 paper and prices have dropped since then as well.
So you're using a 2007 blog post that's citing a 2000 paper that had badly outdated pricing even a year after publication. You can do better than that, please try. There are probably some more recent numbers in one of the reports of the Turner Pensions Commission.
Ark Welder commented on this post, just as I'm doing, because you brought that obsolete report up again. Why not stop using obsolete data when you've been pointed to something more recent?
i'm not sure I agree with your method of working out the bid/ offer spread. you only pay stamp duty when you buy shares, so should you not have subtracted 0.25%? why did you not take into account commission in your calc?
however i do agree that spreads will have went down in the last 10 years. how about assuming 50bp. of course smaller companies and EM are likely to have a much higher spread.
So the cost of buying and selling shares is likely to be:
selling commission 0.17% (your figure)
bid/ offer spread 0.5%
buying commission 0.17% (your figure)
stamp duty when buying 0.5%
Price impact 0.25%
coming to a grand total of 1.59%. of course commission might be a bit lower if they use a darkpool.... then on the other hand we all know that stockbrokers give fund managers a lot of freebies like research, so the commission might not be that low.
i'll agree it is quite an old document, but it does seem to have the same figures that are in the month old articles in the Investors Chronicle and Guardian. Have you managed to have a look at them?0 -
I thought that saying you were an idiot was pretty clear.
Did you ever get around to telling us the difference between unit trusts and trackers, by the way?
Thought not.
Ta ta for now.I am an Independent Financial AdviserYou should note that this site doesn't check my status as an Independent Financial Adviser, so you need to take my word for it. This signature is here as I follow MSE's Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.0 -
I thought that saying you were an idiot was pretty clear.
Did you ever get around to telling us the difference between unit trusts and trackers, by the way?
Thought not.
Ta ta for now.
LOL, tell us what you get in your christmas cracker this year, last year you got an IFA qualification. might be something better this year.0
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