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The True Cost of A 300,000-Peso Investment

Have you ever wondered how much your investment actually cost you? I usually do.

So, I made some computations to know how much it will cost me to invest with Philippine Stock Exchange Index (PSEI) as my benchmark.

My computations are based on these three funds:

  1. Self-Managed Fund
  2. Mutual Fund
  3. Exchange-Traded Fund

SELF-MANAGED FUND

For this fund, an investor opts to buy a number of shares of each of the 30 companies included in the PSEI.

Cost: Php6,660.00 or 2.22% of Php300,000.00

This particular cost includes Trading Fees and Operating Expenses (Internet, Electricity, and Labor). This is a one-time payment.

MUTUAL FUND

Perhaps one might find it daunting to manage 30 companies, so a professionally-managed fund might be a better fit. For this fund, one can have an instant diversification of his portfolio upon subscription to an Equity Index Fund.

Cost: Php5,340.00 or 1.78% of Php300,00.00

This particular cost is based on the Expense Ratio of an Equity Index Fund. It’s not a one-time payment since every professionally-managed fund has annual fees (i.e. investors are charged 1.78% annually). With that, we can assume that the cost of a Php300,000.00 Mutual Fund investment is Php57,886.83 based on Expense Ratio given above on a 10-year investment period. (Yes, even costs compound. Beware.)

EXCHANGE-TRADED FUND

Similar to the latter, this fund can give the investor instant diversification upon buying a minimum of 10 shares (minimum board lot).

Cost: Php2,970 or 0.99% of Php300,000.00 + Php870.00 or 0.29% of Php300,000.00

Same as the latter, the 0.99% is not a one-time payment since it consists of the 0.50% Management Fee and 0.49% Expense Ratio charged annually. We can then translate the cost of Php300,000.00 ETF investment to Php31,058.68. However, the additional 0.29% is a one-time payment representing the Trading Fees for buying shares of ETF. Total cost combining the two is Php31,928.68.

To summarize, the true cost of a 300,000-Peso investment on a 10-year horizon for:

Given this data, please know that I’m not advising anyone to maintain a self-managed portfolio with 30 stocks to manage. Besides, not everyone has Php300,000.00 for a one-time investment. But if in case that you have, I laid the data for you. Hope this somehow helps.

Note: I may have tried my best to achieve an accurate computation, but you may see some mistakes (pardon me for that).