Has bivio ever considered putting trading fees in the income
statement as an expense item? I know that when I put
togeher my club's income statement I do look at trading cost
as an expense item.

Trading fees are considered part of the cost of the stock, if entered
appropriately. You do, of course, seek to keep them low by not making
smaller purchases, and using a lower cost broker. Gene Rooks, Orlando

To get a true cost, trading fees should be on the income
statement and not get blended in with the stock price.
Novice investors need to know how much trading costs are as
a percentage of trading income. I download the transaction
log from bivio and create my own sophisticated income
statement with real expenses / revenue. It is a basic
hockey stick formula more you invest, less the trading fee
bites into the base ROI hurdle.

Tim Mansfield, Jacksonville FL

PS - Nice to see we have other investors in Florida. Maybe
we can share stock tips some time.

Gene Rooks wrote:
> Trading fees are considered part of the cost of the stock, if entered
> appropriately. You do, of course, seek to keep them low by not making
> smaller purchases, and using a lower cost broker. Gene Rooks, Orlando

Tim, true cost is what you really have to pay. That includes the broker's
fee. You aren't going to get 100 shares of $25 stock for $2500, it is
going to cost you $25xx.00, the xx being the broker's fee. Gene Rooks,
Orlando, Space Coast Chapter.
P.S. We've got lots of clubs and members in Florida, our Space Coast reach
goes up to Palm Coast.

From an IRS Accounting stand-point for filing taxes I agree
with you Rip. From a managerial stand-point of
understanding the expense and revenue drivers of the club,
my club breaks it out for our management reports. My club
turns over its stocks approximately every 120 to 180 days.
Yet if a round trip on one position using Ameritrade costs
on average say 3 trades at $33; then your hurdle on a $1000
investment is 3.3% whereas with a $2500 investment the
hurdle is 1.3%. We are in compliance with our taxes but
manage our business with true expense / revenue figures on
our club P&L.

Tim

Rip West wrote:
> Tim,
>  
> <<
> To get a true cost, trading fees should be on the income
> statement and not get blended in with the stock price.
> >>
>  
> 'True cost' of what? I submit that to get a 'true cost'
> the trading fees should be included with the stock price. I would be the last to
> argue that IRS considerations should prevail over sound accounting practices,
> but the fact remains that IRS regs insist that the commissions are a part of the
> cost of the security purchased.
>  
> <<
> Novice investors need to know how much trading costs are
> as a percentage of trading income. 
> >>
>  
> You are talking about a group of investors that are more
> of the buy and hold school, rather than the trading school. These investors may
> have no trading income at all until several years down the pike when the stock
> is sold.
>  
> Rip West
> Saint Paul, MN
>  

Jim & Tim,

I can't imagine bivio ever allowing trading commissions to
be entered as an expense on the Income Statement. It's not
an acceptable accounting practice nor is it an allowable
expense on a tax return, which is where all real expenses /
revenue flow through from the bivio Income Statement. The
IRS truly frowns at such sophisticated hockey stick formulas
intruding on ones taxable income. (Sorry, I couldn't help
myself :) ) They consider it as part of the cost of the
stock or the cost basis of the stock. It can only be
deducted at the time the stock is sold, and that would be
the only time you have trading income. The only other type
of income you might possibly have would be investment income
such as interest or dividends. Maybe some capital gains if
you are investing in mutual funds. These are not considered
as trading income.

However, in my reading of the tax code, I believe you may be
able to currently deduct the initial cost of setting up a
DRIP or DDP ( Dividend Reinvestment Plan or Direct Purchase
Plan). Rip West would know more about that than I. He's the
smartest guy I know. :)-

I think you will find that needing to know the percentage of
trading cost to trading income is not as important as
knowing the percentage of trading cost of your stock
purchase. Trade commissions are a fact life when it comes to
investing and should be a concern. I believe most investment
clubs or any investor has a predetermined commission
percentage guideline. Again in my reading, I believe the
general goal is to keep trading commissions at or below 2%.
So the obvious is to take advantage of low commissions and
invest higher dollar amounts when possible, just like Gene
stated.

So is it warm down there in Florida? It's kind of wet and
rainy here in Oregon.

Debi

Timothy Mansfield wrote:
>
> To get a true cost, trading fees should be on the income
> statement and not get blended in with the stock price.
> Novice investors need to know how much trading costs are as
> a percentage of trading income. I download the transaction
> log from bivio and create my own sophisticated income
> statement with real expenses / revenue. It is a basic
> hockey stick formula more you invest, less the trading fee
> bites into the base ROI hurdle.
>
> Tim Mansfield, Jacksonville FL
>

Its eighty degrees here and just in from church.

I'm taking the finance / ecnomics angle; however when we
file our taxes, my club will continue to be in full
compliance with accounting rules.

I like to be able to look at the end of the year how much in
commissions we spent on both the buy and sell side in
analyzing how well we did for the year. Likewise, I also
like to look at gains / revenues without the effects of
trading commissions. Maybe if there is an investor
conference some-time then I can present our analysis angle
with the caveat that it is not an appropriate report for tax
time rather just managerial effectiveness.

Hockey stick simply meaning the difference between
commissions with a $500 investment vs. a $2500 investment.
Should be simple math for everyone to do on a sliding scale.

Tim Mansfield

Deborah J. Rollins-Thorne wrote:
> Jim & Tim,
>
> I can't imagine bivio ever allowing trading commissions to
> be entered as an expense on the Income Statement. It's not
> an acceptable accounting practice nor is it an allowable
> expense on a tax return, which is where all real expenses /
> revenue flow through from the bivio Income Statement. The
> IRS truly frowns at such sophisticated hockey stick formulas
> intruding on ones taxable income. (Sorry, I couldn't help
> myself :) ) They consider it as part of the cost of the
> stock or the cost basis of the stock. It can only be
> deducted at the time the stock is sold, and that would be
> the only time you have trading income. The only other type
> of income you might possibly have would be investment income
> such as interest or dividends. Maybe some capital gains if
> you are investing in mutual funds. These are not considered
> as trading income.
>
> However, in my reading of the tax code, I believe you may be
> able to currently deduct the initial cost of setting up a
> DRIP or DDP ( Dividend Reinvestment Plan or Direct Purchase
> Plan). Rip West would know more about that than I. He's the
> smartest guy I know. :)-
>
> I think you will find that needing to know the percentage of
> trading cost to trading income is not as important as
> knowing the percentage of trading cost of your stock
> purchase. Trade commissions are a fact life when it comes to
> investing and should be a concern. I believe most investment
> clubs or any investor has a predetermined commission
> percentage guideline. Again in my reading, I believe the
> general goal is to keep trading commissions at or below 2%.
> So the obvious is to take advantage of low commissions and
> invest higher dollar amounts when possible, just like Gene
> stated.
>
> So is it warm down there in Florida? It's kind of wet and
> rainy here in Oregon.
>
> Debi
>
> Timothy Mansfield wrote:
> >
> > To get a true cost, trading fees should be on the income
> > statement and not get blended in with the stock price.
> > Novice investors need to know how much trading costs are as
> > a percentage of trading income. I download the transaction
> > log from bivio and create my own sophisticated income
> > statement with real expenses / revenue. It is a basic
> > hockey stick formula more you invest, less the trading fee
> > bites into the base ROI hurdle.
> >
> > Tim Mansfield, Jacksonville FL
> >

no problem. I didn't major in hockey sticks.

I have an MBA from the University of North Florida and
current pursuing my CPA. I work full time at Citi Bank
credit cards as a Sr. Fin Analyst (economics, modeling,
business growth).

Rip West wrote:
> <<Its eighty degrees here and just in from
> church.>>
>  
> Well, then, you're not the guy I'm going to be listening
> to when it comes to hockey sticks <g>
>  
> Rip West
> Saint Paul, MN
>  

Tim, at least your club realizes the effect of broker fees on gain. I've
audited too many club books that pay a fee, even if only $7, to buy $200 or
$300 worth of stock at a time, adding to holdings as they go along, with
apparently no thought that their stock has to gain anywhere from 3 to 5% or
even more before they begin to come out ahead.

Rip, I'm sporting my first sunburn of the year, down where the old Gators
play football and basketball. What is hockey? Best wishes, Gene

Go Jax Jaguars.

Gene Rooks wrote:
> Tim, at least your club realizes the effect of broker fees on gain. I've
> audited too many club books that pay a fee, even if only $7, to buy $200 or
> $300 worth of stock at a time, adding to holdings as they go along, with
> apparently no thought that their stock has to gain anywhere from 3 to 5% or
> even more before they begin to come out ahead.
>
> Rip, I'm sporting my first sunburn of the year, down where the old Gators
> play football and basketball. What is hockey? Best wishes, Gene