You have a $102000 portfolio comprising 16 stocks. You trade each stock five times this year and each time you trade, you pay about $30 in commissions and spread. You have no special knowledge, so you earn only the average market return of 14 % on your investments. How much lower will your total return be because of your trades?

Question

Business

Desiree Cortez

4 August, 06:42

You have a $102000 portfolio comprising 16 stocks. You trade each stock five times this year and each time you trade, you pay about $30 in commissions and spread. You have no special knowledge, so you earn only the average market return of 14 % on your investments. How much lower will your total return be because of your trades?

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Ezra · Answer 1

My total return is lower 1.05% because of my trades

Explanation:

The total commission and spread I have to pay for trading five times in year is $150 ( = $30 x 5)

The total return on the portfolio of $102,000 is $14,280 = (14%*$102,000)

So the total commission and spread / the total return = $150/$14.280 = 1.05%