You will be able to list every cost of running your own portfolio and find the current figure for each.
Ask Marcus what his portfolio costs to run and, before this module, he'd have said "the expense ratios, about 0.2%". That was the only cost he'd ever seen printed. When he went through a year of contract notes, broker statements and fund reports, he found seven lines, and the expense ratios made up less than half of the total. None of the others was hidden, exactly. They were spread across documents he'd never added together.
This lesson lists every money cost of running your own portfolio and shows where to find each one. Every rate below is a made-up example. Look up the current figure for each line from its source, and write the source and date beside it.
Each fund charges a yearly expense ratio, taken from its assets before the price you see. Build and run an ETF portfolio covers what it includes and leaves out in lesson 3.1, Expense ratio and the costs it leaves out, and why tracking difference is the better measure in lesson 3.2, Tracking difference is what you actually lost to the index.
With made-up expense ratios of 0.20% on his S$91,000 world ETF, 0.30% on his S$20,000 STI ETF and 0.40% on his S$30,000 bond fund, Marcus pays about S$362 a year. He never sees it leave, because it's already inside the fund's returns.
Every trade pays a commission and often a platform or clearing fee, all on the contract note. It also pays the spread and any market impact and slippage, which lesson 5.3, Spreads, depth and market impact on small and large stocks, showed never appear as a line at all.
Marcus made 16 trades last year. At a made-up average of S$12 in commission and fees, that's S$192. Using the trade-cost tab from lesson 5.8, Measure the true cost of five paper trades, he estimated spread and impact at about 0.2% of the S$30,000 he traded: S$60. Larkspur, thinly traded, accounted for most of that, as it did in his paper trades.
Some brokers charge a custody fee to hold your shares, a platform fee each month or quarter, or a fee per dividend collected. Others charge nothing for holding and make their money elsewhere. Read your broker's whole fee schedule, because these charges usually sit well below the commission table. Marcus's came to a made-up S$100 a year in platform fees.
Buying a US stock means converting Singapore dollars into US dollars, and selling it means converting back. Each conversion pays a spread between the rate you get and the mid-market rate, plus any fee. Investing in US and global markets from Singapore shows where it hides in lesson 2.1, Where the FX cost hides in a US trade. Remember that it applies twice over the life of a holding, once on the way in and once on the way out.
Marcus converted about S$10,000 last year for US purchases. At a made-up spread of 0.3%, that cost about S$30. This is a different thing from currency risk, which lesson 11.7, Currency risk and when hedging earns its cost, dealt with: a conversion cost is certain and paid at once, whatever the dollar does next.
When a foreign company pays a dividend, its home country may tax it before the money reaches you. Investing in US and global markets from Singapore covers US dividends in lesson 3.1, Why 30% of a US dividend never reaches you, and lesson 3.3, How Singapore treats the dividends that reach you, explains why, for a Singapore individual, that tax is usually a final cost with nothing to offset it. Rates are set by the country paying the dividend and by any tax treaty, so check the current rate with your broker and the source country's tax authority before you rely on any figure, the one in that lesson's title among them.
The paperwork that decides which rate your broker applies, the W-8BEN, is covered in lesson 3.2 of that course, What the W-8BEN does and does not do, and how your broker holds your shares in its module 1, Know who actually holds your overseas shares.
Marcus's chip designer pays a made-up dividend yield of 1%, about S$150 a year on his S$15,000. Using 30% as the example rate, about S$45 is withheld. Funds pay withholding too, inside the fund, where you never see it. His world ETF is Irish-domiciled, which changes the rate it pays on US dividends, as lesson 5.2 of the global course, How Irish domicile changes the dividend tax, explains. With a made-up dividend yield of 1.8% on the fund, 65% of it from US companies, and a made-up fund-level rate of 15%, about S$160 a year leaks away before it shows in the price.
One related risk isn't a yearly cost at all. US shares held directly can expose your estate to US estate tax, which lesson 4.1 of the same course, The US can tax your US shares when you die, covers. Note it in the same tab as a risk, with the value of your US-situated holdings beside it.
Here is Marcus's stack, all made-up figures for one year:
Fund expense ratios S$362, commissions and fees S$192, spreads and impact S$60, currency conversion S$30, platform fees S$100, US withholding of S$45 on his chip designer and S$160 inside his world ETF
The total is about S$949, about 0.47% of his S$202,000 portfolio. The expense ratios he used to quote were about 38% of it. Two lines are missing on purpose. Tax on gains, which for most long-term investors in Singapore is nil, belongs to lesson 12.4, Tax on gains and dividends: check how IRAS treats you. And his hours, which turn out to be the largest cost of all, belong to lesson 12.5, Price your hours: what your research time costs.
For the activity, you'll build the same list for your own account, with each line's current figure from your broker's fee schedule, your contract notes and your fund documents, and the source you checked beside it.
List every cost line for your own account with the current figure from your broker's fee schedule and the source checked.
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