You will be able to put a dollar value on the hours you spend on your portfolio and add it to your costs.
Draw three columns on a page or in a note on your phone, headed research, monitoring and admin. For the next two weeks, every time you spend time on your investments, write the minutes down in one of them. The money cost stack from Lesson 12.3, "The full cost stack: commissions, spreads, FX, custody and withholding tax", leaves out time, because nobody sends you a bill for it. The log is how you measure that missing cost.
Memory is a poor guide to time spent. People underestimate small, frequent activities. A two-minute price check twenty times a week doesn't feel like much while you're doing it. People also overestimate occasional big activities, such as a weekend with an annual report. Both errors point the same way, so a written log beats a guess.
Each block of time goes into one of three columns:
Research: reading reports, modelling, valuing and writing memos. Monitoring: checking prices, reading news and following results. Admin: trades, statements, tax records and rebalancing.
Round each entry to the nearest five minutes. Run the log for two weeks, or better, a month.
Marcus, the private investor who runs his own portfolio throughout this course, guessed he spent "maybe an hour a week" on investing. The figures in his example are made up, apart from his cost stack from Lesson 12.3. He logged every app check, annual report page and spreadsheet session for two weeks. The total was 6 hours, and most of it was not research. It was price checks on the train, news about his stocks and tinkering with his workbook. The split was 3 hours research, 2.5 hours monitoring and half an hour admin.
To annualise, multiply the two-week total by 26. For Marcus, 6 hours x 26 is about 156 hours a year, close to four working weeks. Two weeks can mislead, because results seasons and yearly reviews bunch the work together. Check your annual figure against your busiest months too, and adjust it if those months would push it higher.
There are two sensible ways to value an hour, and each answers a different question. The first is your after-tax hourly pay, meaning what an hour of your work actually brings home. This is a fair default, because it is the rate at which you already trade time for money.
The second is the price of an hour you could actually sell, through overtime, a side job or freelance work. If a weekend consulting job would pay you S$60 an hour, that is the price of your weekend hours. If you could not sell the hour at all, its price is what you give up instead, such as rest, family or exercise. That forgone value is harder to put in dollars but no less real.
Some people enjoy investing as a hobby and argue its hours are free. That is a legitimate view, but write it down honestly, for example: "I value these hours at zero because I enjoy them." Having it on paper lets you see what the hobby costs if it also loses money, and it stops you mistaking enjoyment for skill.
Marcus takes home about S$84,000 a year for about 44 hours a week, which works out to roughly S$36 an hour. His 156 hours x S$36 come to about S$5,616 a year, about 2.8% of his S$202,000 portfolio.
In Lesson 12.3, Marcus's money costs came to about S$949, or 0.47%. His hours cost about six times as much as all his fees, spreads and taxes combined. Adding the two gives an all-in cost of about S$6,565, about 3.25% a year.
Hours are easy to leave out, because no one sends a bill and the money never leaves your account. The time is gone either way. A fund manager's fee pays for someone else's hours, and when you run your own money, you pay the same bill in time. The comparison in Lesson 12.6, "Benchmark your results against a managed fund, like for like", is only fair if you count both bills, the fund's fees and your time.
The next step is to see which part of the portfolio uses the time. Marcus's core takes about 12 hours a year, covering one yearly review, a rebalance and a few statements. That leaves 144 hours on his four stocks. At S$36 an hour, 144 hours cost about S$5,184 a year.
In Lesson 12.1, "Core and satellite: where stock picks sit next to index funds", Marcus set his satellite at 18% of the portfolio, about S$36,360. His stock hours cost about 14% of the satellite's value every year. To pay for their time, his stocks would need to beat the index by around 14 points a year. His measured edge over the index across five years is about 0.15 points.
Hours also come in lumps. Researching a new stock has an up-front entry cost in hours, and every stock you add carries one. Marcus estimates about 40 hours of focused work on Larkspur across modules 6 to 9, where he built a reading log, a three-statement model, a DCF and a memo. At S$36 an hour that is about S$1,440, roughly 18% of the S$8,080 his rules allow him to hold in Larkspur, before any monitoring. The smaller the position, the larger the hours cost relative to what the position could earn. This argues for owning fewer stocks and holding each one longer, and against adding a stock unless the work has a fair chance of paying back. Count the entry cost for each position you hold against its size.
When Marcus looked at his log, most of his monitoring time was price checking, which adds nothing to a long-term decision. He set a rule to check prices once a week and to read company news only around results announcements. That cuts his hours sharply without changing any holding.
Start your own log today, with three columns for research, monitoring and admin, and keep it for two weeks before you work out the yearly cost.
Log your investing hours for two weeks, scale them up to a year and convert them to SGD at your after-tax hourly pay.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).