The Daily Workshop Report
by Robert Sheard (TMF Sheard)

     Growth Screens
 18.69%  Relative Strength  
  8.25%  YPEG Potential  
  5.11%  Unemotional Growth  
  4.68%  EPS Plus RS  
  3.85%  Investing for Growth  
  2.78%  S&P 500 Index  
  1.75%  Low Price/Sales  

     Value Screens
  5.43%  Dogs of the Dow  
  4.87%  Dow Jones Ind Avg  
  4.01%  Dow Combo  
  4.00%  Beating the S&P  
  3.14%  Unemotional Value  
  3.14%  Beating the Dow  

One of the big issues with the Unemotional Growth approach is trading costs. If one is to update and rebalance every month, the number of trades can generate prohibitive costs for many investors. So let me say up front, this approach isn't for everyone. If the cost of implementing such an approach runs your annual trading costs above roughly 2.5% of your portfolio's value, then your costs are getting too high.

How much does it cost? While I don't have a precise average for the number of trades each year, a quick scan of the database shows that in most months, only one or two stocks will turn over. So, if you're replacing 1 or 2 stocks and rebalancing the rest, a pretty high estimate for total trades might be 75 trades a year. Depending on what you pay per trade, that can be a whopping commission bill.

One way to reduce that number significantly is to continue to update monthly, but only rebalance the weight of all your positions quarterly instead of every month. Another way is to shift both the updating and rebalancing cycles out to every other month or once a quarter. You lose a little of the model's sensitivity that way, but you certainly reduce the trading costs.

Whatever approach you adopt, you should look at $800 as the maximum you should spend in a year on commissions. That's the rate you can get as an annual flat-fee from K. Aufhauser. If you're spending more than $800 on commissions, you might want to consider their annual plan. If you can implement the plan for even less at one of the very deep-discounters, so much the better.

So, given our 2.5% cap for annual trading costs, that $800 maximum puts any such strategy within reach when your portfolio is at least $32,000 (800 / 32,000 = 2.5%). And that doesn't mean $32,000 devoted just to these UG stocks. That's for your total portfolio since the $800 fee is fixed and not tied to the number of trades (as long as you stay under 20 trades per month).

So consider those two figures as your benchmarks. You should be keeping your total annual trading costs at 2.5% or less of your portfolio, and you shouldn't have to spend more than $800 a year in any case since that offer is available to you in a single flat-rate plan. Find where you fit into this matrix and use the best deal and strategy for your particular situation.