THE SHORT · INVESTING
Buying then selling $1,000 costs you 2.07% before any return
Two commissions and one bid-ask spread. On $1,000, your investment has to gain 2.07% just to get you back to even. On $10,000, 0.28% will do.
You buy $1,000 worth, you sell a few months later. In between, three deductions: the buy commission, the sell commission, and the gap between the price you are sold at and the price you are bought back at.
| Amount | Commissions | Spread (0.08%) | Total | As % of capital |
|---|---|---|---|---|
| $1,000 | $19.90 | $0.80 | $20.70 | 2.07% |
| $10,000 | $19.90 | $8.00 | $27.90 | 0.28% |
The same round trip costs you 7.4 times more in percentage terms on $1,000 than on $10,000. In dollars the gap is only $7.20: the fixed part does all the work.
What that changes in practice is your break-even. On $1,000, until the holding is up 2.07% you are down — even when your screen says it has risen. The screen shows the price, not your cost.
And it is the strongest argument against frequent round trips: every rotation pays the toll in full. Four round trips in a year on $1,000 is 8.28% in costs — before being right even once.
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