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I wrote recently about how I use my year-end break to do a thorough review of my long-term, second-tier and trading portfolios.
I am checking the returns, the quality of the stocks I bought and whether my trading was disciplined.
Here I am not worrying about profits or losses – they will look after themselves if I stick to my methodologies and do the right thing at the appropriate time.
There is, however, one other process I go through every year end, which is all about rands and cents as I review my expenses.
Now this is definitely in part about personal expenses – and I have been able to reduce my monthly expenses greatly over the past year by downgrading my living from a large house to a small flat.
I also stopped a number of small expenses that individually were very small, but collectively added up.
For example, paying for software to help manage my multiple social media accounts (company and personal accounts), online subscriptions to software I seldom used or that I was able to replace with perfectly good free software that met all my requirements.
This has helped me to save a large amount every month.
But I want to focus on the expenses within my trading and investing portfolios. Most of these costs are fixed.
So as your portfolio grows, the costs remain as they were and reduce as a percentage of your portfolio. But I still make sure I am getting the best deal.
So, I have a hard look at costs I incur. For example, data and live prices. I used to pay for end-of-day data for charting software and live intraday data.
That cost was around R3 500 a year. It was easy to justify as I require both to do both my investing and trading, but also my job of monitoring markets.
However, in 2017 my broker launched a new live data platform that enabled me to cancel my end-of-day data provider and I’ll save some R1 500 a year as a result.
Now nobody is retiring on that, but it is money I would much rather have in my pocket than in someone else’s.
The reality is you need to ask yourself whether you really need live data and/or end of day prices for charting software. You may have had ideas about being a hotshot day trader, but have deferred that dream.
So you may not need any expensive data. If you do need it, check if your broker offers free charting that meets your needs. We seldom need high end charting software.
What about your broker’s admin fee? Some brokers charge nothing but then give you very little. Others charge a hefty fee, but offer lots of bells and whistles.
Do I need all the bells, or could I get them elsewhere for less? In my case my broker has been increasing their admin fee over the last few years but I still consider it very good value for money so I am happy to pay.
One exercise I did many years ago (to reduce the admin cost) was to consolidate all my investing and trading activity to one broker.
I used to have multiple accounts – each with their own purpose – with different broker. Fortunately my broker’s offering grew and I was able to close all but one account and now only pay one admin fee.
I am then ruthless about all my paid subscriptions. The fee may seem small, but am I really using the product? I used to pay for access to four online international newspapers, but was never able to make real use of them all.
So I cancelled three of them and use their more limited free access while keeping my preferred one. (Here I was able to check my browser history to see how often I went to each online newspaper and determine that 10 free reads a month was most often enough.)
Again, these are small expenses. But it starts to add up as this is another R2 000 in my pocket every year.
Check every fee that you’re incurring and make the hard decisions. Does it really add value? If not, cancel it.
Simon Brown is the founder and director of investment website JustOneLap.com.
