You will calculate every cost of buying and later selling a US-listed share or ETF, in SGD.
Rachel wants to start buying a US-listed fund every month with S$500, but a friend told her small trades are a waste because the fees eat them. Another friend says fees don't matter if you hold for years. Both are guessing. This exercise replaces the guess with a number: what one round trip, buying and later selling, costs you at three trade sizes, and the smallest trade size you are comfortable with.
You need your broker's fee schedule, a recent trade or conversion confirmation, and a spreadsheet. The worked example uses a made-up broker so you can check your method. Your own broker's numbers will differ.
Open the fee schedule and list every charge that applies to buying or selling a US-listed share or ETF. The common ones are:
Commission per order, sometimes a percentage with a minimum. Platform or account fees charged per order. Exchange and regulatory fees, often passed through on sales and usually small. An explicit conversion fee, if your broker charges one. The FX spread, which you measured in lesson 2.1, Where the FX cost hides in a US trade.
Mark each line as fixed, meaning the same in dollars whatever the trade size, or variable, meaning it scales with the size. A commission with a minimum is fixed for small trades and variable for large ones.
The made-up broker charges a commission of US$1.50 per order and a platform fee of US$1 per order. On a sale it passes on exchange and regulatory fees, which we will round up to US$0.10. It converts at a spread of 0.3% each way and charges no separate conversion fee. Assume S$1.35 per US dollar throughout, and assume the price of the fund does not change, so the only thing that moves is cost.
Buying costs US$2.50 in commission and platform fee. Selling costs the same US$2.50 plus US$0.10 in passed-on fees. That is US$5.10 for the round trip, about S$6.89. This cost is the same whether you trade S$500 or S$10,000.
The spread applies when you convert Singapore dollars to buy and again when you convert the proceeds back. At 0.3% each way, that is 0.6% of the trade size for the round trip.
On S$500, the FX cost is S$3. On S$2,000 it is S$12. On S$10,000 it is S$60.
Add the fixed and FX costs and divide by the trade size.
At S$500, the total is S$6.89 plus S$3, about S$9.89, which is about 1.98% of the trade. At S$2,000, it is S$6.89 plus S$12, about S$18.89, or 0.94%. At S$10,000, it is S$6.89 plus S$60, about S$66.89, or 0.67%.
Notice the pattern. At small sizes the fixed costs dominate, and the percentage falls quickly as the trade grows. At large sizes the FX spread dominates, and the percentage flattens out near 0.6%, because no trade size can get below the spread. If your broker's spread is the biggest line at the sizes you trade, look again at lesson 2.2, Convert per trade, in bulk, or hold US dollars. If the fixed costs are the biggest, trading less often in larger amounts is the lever.
Decide what total round-trip cost you accept, as a percentage. There is no correct figure. Someone holding for twenty years may accept more than someone who expects to sell in three. Write your level down before you calculate, so the answer does not talk you into it.
Then find the smallest trade size that gets under it. In the made-up example, if Rachel's limit is 1%, she solves for the size where S$6.89 plus 0.6% of the size equals 1% of the size. The fixed S$6.89 has to fit into the remaining 0.4%, so the size is S$6.89 divided by 0.004, about S$1,722. Below that, her round trip costs more than 1%.
That told Rachel something concrete. At S$500 a month she would pay close to 2% per round trip with this broker. She could invest every quarter instead, at about S$1,500, which still sits a little above 1%, or look for a broker whose fixed costs are lower for small trades. Either way, she now decides on a number she worked out herself.
Your finished calculator shows each cost line with its source in the fee schedule, the round-trip total in Singapore dollars and as a percentage at S$500, S$2,000 and S$10,000, and one sentence naming your accepted level and the smallest trade size that meets it. Use your own broker's schedule and your own measured spread, not the made-up figures above, and keep the sheet so you can rerun it when the broker changes its fees.
Complete the round-trip cost calculator for one real broker and write the smallest trade size where total costs fall below a level you accept.
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