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A Matter of Perspective

Added Costs From a Financial Transaction Tax Would Be Minuscule Compared to Fees Investors Already Pay

March 12, 2014 - A financial transaction tax (FTT) would cost ordinary investors just a minuscule amount compared to costs and other hidden fees they already bear, while bringing in revenue and discouraging risky trading practices, a new Public Citizen report shows. The report, “A Matter of Perspective,” analyzes the costs that would be paid by a hypothetical investor who invests his or her money either in a mutual fund or a self-directed portfolio of individual stocks.

If the person invested $85,000 (representing roughly the average size of a 401(k) account) in a mutual fund with average fees and asset turnover rates, that investor now would spend $1,144 a year in fees and hidden costs, the report concludes. In comparison, the investor would pay only $24.48 in annual costs resulting from a 0.03 percent FTT. If one includes an FTT purchase tax on an $85,000 investment, the investor’s total, first-year FTT-related costs would be just $49.48.

Similarly, an investor who buys and purchases his or her own individual stocks currently pays about 13 times more in costs than the investor would pay for in annual costs resulting from a 0.03 percent FTT, the report shows.

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