Joined: 29/May/2007
Location: India
Online Status: Offline
Posts: 1134
Topic: Did you know this? Posted: 20/Dec/2007 at 11:29am
Warren Buffett has estimated that the investing public pays about $130
billion a year in brokerage costs, fund management fees and other
expenses. Considering that the companies in the S&P 500 generated
total operating income of $137.6 billion last year, Buffett's math has
an astounding implication: that we investors are turning most of our
rightful share in corporate America's profits over to the
intermediaries who handle our money for u .
Joined: 01/Jan/2006
Location: India
Online Status: Offline
Posts: 18403
Posted: 21/Dec/2007 at 12:24pm
If you add the spread that goes into buying and actually selling shares the potential leakage is far more then it appears. Unfortunately very few understand this plain logic and once they understand this they would shift the cash flow from the brokers back to the clients. Problem is it never suits the broker to educate the client.
'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in
Joined: 01/Dec/2007
Location: United Arab Emirates
Online Status: Offline
Posts: 544
Posted: 21/Dec/2007 at 1:16pm
Very well said Basant Ji. Very few investors consider Bid/Ask spread.
The effect is multiplying if one is a day trader, specially in context with Indian shares, where one has to pay service tax and STT for each transaction.
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