What investing really costs you, with the numbers worked out
Beginner · Costs · no code
Costs 1: What you pay and can see
The costs that are written down somewhere and that almost nobody adds up anyway: what a minimum commission genuinely takes out of a small order, what a custody percentage that sounds ridiculous when said out loud costs you over a year, why currency conversion is the only cost charged without appearing on a single line of the statement, and what a 1.5% TER does to thirty years of compounding.
Costs 2: What you pay and cannot see
The costs that arrive on no invoice and that almost nobody measures: the half spread you pay the instant you go in, the slippage between the price you saw and the price you got, the impact your own order causes when you are too big for the stock you are buying, and the opportunity cost of the order that never filled; all of it gathered into the only number that genuinely matters, implementation shortfall.
Costs 3: Where your order really goes
Who keeps the money you pay without seeing it: why a commission-free broker still earns, and through five different channels, where your order goes when it never reaches the public book, how payment for order flow works and why genuine price improvement can still fall short of the best possible result, and what you can check for yourself about the quality of your executions.
Costs 4: Funds, ETFs and products
What genuinely changes between a traditional fund, an ETF and a basket of individual shares once you look at how each one is executed and at what it lets you do afterwards, how the machinery that keeps an ETF's price glued to its net asset value works from the inside and what risks synthetic replication and securities lending add, why the real deviation from the index tells a different story from the stated TER and is sometimes even a favorable one, and how to spot the products that charge dearly for looking simple without falling into the caricature that all of them are a scam.
Costs 5: Tax as a cost
The only cost on the list that depends on when you act and not just on what you are charged: what separates a dividend from a capital gain and why that stops two identical funds from being identical, why the tax you defer behaves like an interest-free loan that carries on working in your name, how a loss turns into an asset and which rule stops you using it if you change your mind too soon, and why the withholding a fund suffers abroad appears in no fee but very much in the return.
Costs 6: The full bill
The level that turns the previous five into a figure and into judgment: how every cost in a real portfolio adds up until you can see what fraction of the expected return disappears, why turnover multiplies any unit cost until it becomes decisive, why a backtest that does not subtract costs is literally fiction and what happens to a plausible strategy once it is handed the bill, and how to design an operation that does not eat its own return before you move on to the rest of the academy.