Course 111: Exploit the Magic of Compounding
Keeping Costs Down
In this course
1 Introduction
2 Keeping Costs Down
3 The Tax Man
4 The 0% Loan

With all the hoopla about day trading and technical analysis, why is it that billionaire day traders are few and far between? The answer: It's far better to hold stocks for long periods of time than to trade in and out of them often, racking up costs.

Unfortunately, the magic of compounding can work against you, too. If you trade a lot, you'll rack up taxes, commissions, and other expenses which, over time, compound. Every $1 you spend on commissions today could have been turned into $30 if you had invested that dollar at 12% for 30 years. Spend $500 today and you could be giving up $15,000 30 years hence.

The math gets even worse if you make lots of trades year after year. If you spend $500 every year on commissions, by the end of the 30 years you'll be $121,000 behind where you would have been if you had instead invested that $500 each year and earned a 12% return on the money. Even with commission rates that have dropped dramatically in recent years, commissions represent a powerful wind in the face of your investment returns. Whether you choose to walk against a gentle spring breeze or a raging storm is up to you.

Next: The Tax Man >>

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