Transaction costs in investments

Transaction costs

Transaction costs are the costs we incur when making a financial transfer. In this article we will see their classes and analyze their importance in investments in general and in investing in the stock market in particular.

Transaction cost classes

Transaction costs can be divided between financial and non-financial. On the one hand, there are non-financial transaction costs, such as the time cost of analyzing our investments or the time spent learning to invest. However, these costs in many cases can be considered investments, since they have a positive impact on the profitability obtained, so in the long term they can be more than profitable.

On the other hand, there are financial transaction costs, which are those that can considerably reduce the net profitability of our investments. Therefore, although many beginners overlook this issue, it is imperative to minimize transaction costs to maximize the net return on our savings.

Transaction costs in investments

We recently saw in the article “How much is our savings worth?”The importance of increasing the profitability of our investments to get a better return on the money that it costs so much to earn and save. The problem is that this profitability can be diminished by the financial transaction costs of our investments.

For example, real estate investment involves very large transaction costs, including commissions, administrative, tax and notarial expenses, whichanalysis of the new rates of ING's Orange Broker and we will see ways to reduce these fees to maximize our profitability.