Cost control

Cost control is the reason why the blog moved back here.

It didn't start with the movement of the blog.

Maybe I'm telling something you already know, but it is essential to do cost control. And some small changes can make a hughe difference.

First of all I wish to point out there is a lot of free open source software on the net. Something almost anyone uses is Microsoft office. For this there is an excellent free alternative. I have been using it for over a year, and I can't say I miss anything from Microsoft Office. I'm talking about Open Office It incorporates Word, Excel, Powerpoint, Acces. One of the best features is that you can save directly to PDF. It is compatible with Google Docs and a saved file in open format is about half the size! Open Office doesn't have an e-mail client in it, but for that we have Mozilla Thunderbird Thunderbird doesn't have a standard Agenda in it, however there is a wonderful plugin called Lightning that completes Thunderbird. The most useful thing for me is that I can link it with my Google Agenda. This way I can put in appointments in Thunderbird an my Google agenda is update automatically and the other way around.

An other thing almost anyone uses is Internet Explorer. For this Mozilla also has an excellent alternative Firefox and you can get it in a pack with Google Toolbar. However IE is free, it is still worth checking out Firefox.

For my image manipulations instead of using Adobe Photoshop I use The Gimp however it isn't easy to use, but hey neither is Photoshop.

For my personal money management I'm looking to use GnuCash however I must say I haven't had the chance to test it enough.

I changed back to blogger because of the cost of web hosting and domain reservation. However the cost is low, blogger is free. And I must say Wordpress is very nice, Blogger isn't bad either. When I started the blog I thought Google Adsense would make up for the costs, but it didn't.

Last but not least I changed brokers. When adding the London Stock Exchange and Deutsche Börse to the European Magic Formula Project I started to notice the costs of the transactions. When I buy and sell a stock from the LSE, I had a cost up to 2%. With a portfolio turnover of 100% in the European Magic Formula Project this really eats away the profits. So I changed to a new broker making turnover costs drop to max of 0,8 % that is less then half.

All I want to do here is make you think about things you can and are willing to change. If I make a list of what I safe using this programs and the new broker it is hughe.

No need for Microsoft office save me 750 euro (let's say over 3 years)
Gimp and GnuCash are programs I might not have used when I needed to buy them. Photoshop is about 1500 euro so I would do with the Open Office draw instead.
Blogger instead of hosted Wordpress 180 euro a year.

That makes 430 euro a year. Not bad for doing nothing and still having the same things.

But the change of broker is a gigantic difference. Dropping for a overal trading cost of 1,7% to a max of 0,8% (normally it should be around 0,75% but let's take the worst case scenario) makes me 600 euro a year!! Given the % gained past year with the European Magic Formula Project (+17,96%)this would make a hughe difference in 10 years. In 10 years I would have gained an extra 16.614 euro, in 20 years that is 103.279 euro.

Please people look at your costs, I think you don't want to throw away 100.000 euro

Now for the fun of it let's add the 430 euro to the calculation aswell
In 5 years that would make me 8.685 euro.
In 10 years I would have gained 28.521 euro from investing the money instead of giving it to others
In 20 years I would have an extra 177.295 euro to invest.
Let's not do the math with the results Joel Greenblatt had in his testing of the Magic formula (30,8%). That would be too much.
It is hard to tell you that you would be throwing away 12.372 euro in 5 years time or 59.742 euro in 10 years, or even worse 935.455 euro in 20 years. You would be throwing away almost 1.000.000 €!!!

Do cost control and keep more money to invest, and invest it wisely.