There is the easy method and the more complex method.

An easy computation is to take total dollars collected less total dollars
invested and divide by total assets on hand. This will capture fees, dues
and other brokerage related transaction costs. If you take money for postage
and food - that can also be captured.
Lets say you collect $1000 per month and invest $11,800 (net of broker fees)
in you first year. The $200 divided by the $12,000 collected represent a
simple 1.67%. At the end of the year your $11,800 has grown to $13,000 and
now your expense drops to 1.54% due to the growth in your investment.



Then you can get into capturing after tax returns. Also try assigning value
to capture travel to and from meetings as well as time taken (opportunity
costs) for the meetings.

Lets say you sell 50% of your $13,000 - netting a $600 short term capital
gain. 30% of that gain or roughly $180. is tax and that reduces your gain
calculation - which increases your expense ratio.
Also, many people may drive 20 miles to/from a meeting each month, may hire
a babysitter, or may not work OT on meeting night. These are examples of
opportunity costs (foregone investments) that true investors need to
consider when weighing investment returns. A simple way to calculate this
is to assign a value - such as $20 per hour on the time spent with
investment club duties.

My goal would be to have Bivio contain an area where all expenses are
captured and reported an expense ratio on a before tax / after tax basis.
This would really shed light on how efficient clubs are performing relative
to market returns and relative to actively managed funds.

One fundamental law of investing = the more you trade, the higher your
expenses will be - regardless of returns.


-----Original Message-----
From: Barbara A. Burgess [mailto:baburgess7@bivio.com]
Sent: Wednesday, November 27, 2002 7:28 AM
To: club_cafe@bivio.com
Subject: club_cafe: Re: Expense Ratio


Can you attach a file or tell me how you compute your
expense ratio.

Thanks,

Barbara Burgess, Treasurer
MET

William D. Katona wrote:
> Juan, it's good to see that I'm not the only person
> who "worries" about expense ratios. Although my club
> doesn't keep an ongoing calculation, we try to keep it in the
> 1% range by usually investing $1,000 or more for each
> transaction (which has a 9.99 fee for us). This works out
> well, because we usually have $1100-1200 new money to
> invest each month. Sometimes, we will "cut this in half," and
> invest around $600 each into two different companies,
> although we usually only do this when adding to a position.
> Now that you have my curiosity up, I just figured out my
> club's expense ratio (includes brokerage fees and Bivio fees).
> For this year, our ratio is 1.4% of NEW MONEY added in
> 2002. Our ratio is 0.8% of our TOTAL ASSETS, which is
> probably a better measurement of expense ratio. I feel good
> knowing that we have not only outperformed the market by
> quite a bit the past two years, but that we are also doing well
> in regards to keeping our expense ratio low!
>
>
> Good luck,
> William Katona
> Financial Officer
> Ed Traders Investment Club
>
> Juan Mostek wrote:
> > I would be interested if other clubs calculate their expense
> > ratio to determine club cost effectiveness.
> > In our early years we exceeded 2% due to the start up costs
> > associated with starting a club.
> >
> > We have slowly declined expenses and raised investments -
> > but we are still in the upper 1% range. Some members
> > (including myself) are making the argument that if we can't
> > get below 1.25%, then we are not being as cost effective as
> > the average actively managed mutual fund.
> >
> > Any feedback is much apprreciated.
> >
> > J Mostek
>
>
>
> Juan Mostek wrote:
> > I would be interested if other clubs calculate their expense
> > ratio to determine club cost effectiveness.
> > In our early years we exceeded 2% due to the start up costs
> > associated with starting a club.
> >
> > We have slowly declined expenses and raised investments -
> > but we are still in the upper 1% range. Some members
> > (including myself) are making the argument that if we can't
> > get below 1.25%, then we are not being as cost effective as
> > the average actively managed mutual fund.
> >
> > Any feedback is much apprreciated.
> >
> > J Mostek