Now that we have that opening statement out of the way, Iām trying to make sense of some of the costs and charges pages. It should be relatively straight forward to help me understand.
Question 1:
FTSE 100 ETF LON:ISF has negative transactional costs? How does that work? Then itās so much cheaper than buying individual shares which incur stamp duty!
Question 2:
For those shares that have stamp duty which are a cost on execution, the investment amount is Ā£5,000, so for the Ā£25 (for the 0.5% duty shares), is this on top of the 5,000? That isnāt explicit in the page from what I can see.
Running the numbers for the investment NOT including stamp duty, the indicative value at 5% per year will be £6,381.41 including the charges
But if the investment amount IS including stamp duty (which would be £24.88, and shares being 4,975.12) then the indicative value would be £6,349.65 including charges
Seems to mix up the inclusive and exclusive of charges calculations as you read down⦠Unless Iāve done some creative accounting
Also not really a question, but a thought:
The execution costs arenāt considered when looking at the percent gain/loss of shares owned, so Iām always mentally thinking to take away at least 0.5% of what I see in app.
Youāve stumbled in to my area - brace yourself. Iāll try and not drown you in data!
Question 1 is all about āSlippageā or āArrival Pricesā. Managers are forced to mark the theoretical price they would have got at the point in time the order was transmitted against the price they actually achieved. Give liquidity, illiquidity, market opening hours, exchange/MTF proliferation and so on⦠the price they end up benchmarking against can be higher or lower then what they achieved. So, if they sold Ā£1000 at Ā£1 x 1000 but the Slippage methodology returns a price of Ā£1.01 at the point of ātransmittalā then they will be judged against a sale price of Ā£1010 that they ācouldā have achieved⦠so in this case, a loss. If however market movements went the other way and they sold 1000 @ Ā£1 but at the point of transmittal the price was 99p then theyād be benchmarked against Ā£990 ⦠or a Ā£10 profit⦠Enough of these āprofitsā and you can claim that your trading actually yields a negative (profitable) charge⦠of course the fund in question has theoretically lost money due to a poor manager/poor execution?
This is the joy that the MiFID and PRIIPs regulations place upon managers. Itās highly dubious, itās highly unpoliced and itās highly questionable what managers apply what methodology to calculate this transaction cost. End result : a regulation designed to level the playing field and allow retail investors to compare apples with apples has achieved no such thing⦠and itās increased costs⦠at exactly the point in time everyone is cost conscious and the regulator is asking the industry to bring down costs.
This is better than I could ever explainā¦
ā¦and in the mean time everone is struggling with the āCosts and Charges Disclosureā rules ⦠to the point that the end investor very rarely gets the accurate information they need to make a fair comparison pre-tradeā¦
Itās intriguing to see what should theoretically be done, I guess a bit of interpretation comes into play⦠Plus the mass of data becomes harder to manage trying to keep things up to date.
Thanks for your response! I always like to learn new things.
Do you accumulate data from all these sites and compare them? Iāve used your functions in my spreadsheets before, very helpful!
I do. At least in part. Once you extract everybodies (FT, Charles Stanley, HL, AJBell, Fidelity, II, tickr, Dozens etcā¦etcā¦etcā¦) and line them up and standardise them you notice something⦠theyāre sometimes quite different! That is to say āwrongā. Itās not just costs and charges. Itās KIID documents, factsheets, dividend yield as well as the fee based data (ongoing, transactions, performance etcā¦)
There is a mountain of data out there and it is difficult to manage⦠but it can be managed⦠I know, I build stuff to manage it
Glad you liked it. I have a tendency to go overkill on the info