Jim Zientara: When Investing consider more than cost or you'll be paying more than you expect

March 5, 2013 

Bought a bag of potato chips lately? New car? Jewelry? What's the cost?

I frequently look for a deal such as buy one and get one free. You may too, but what's the cost?

Cost seems an area that may overly affect investors. I agree it may be a factor to consider. A bigger question is, what are you getting for your money.

Suppose an investment costs 1 percent but has the potential to make 4 percent a year. Another investment costs 2 percent but could make 8 percent. Which would you buy?

I remember telling an investor that he has every right to pay attention to the 1 percent cost of his purchase, but let me recommend how the 99 percent should be invested. Which is more important? Don't let the tail wag the dog.

The same applies to taxes.

Many years ago I had a client who had a $20,000 tax bill if she sold a particular stock. Both her CPA and I recommended sale, but she said no. Those were the days of the poison pill, where a company would on paper make itself unattractive to a possible takeover buyer.

Sadly, the stock dropped something like 80 percent in value. Her original cost price was now the market price. So no taxes would be due if she sold. Funny thing is that the price drop never bothered her. She was determined not to pay taxes.

But her being penny wise and pound foolish certainly bothered me. She could have given the profits after taxes to her kids or charity, instead of losing the money.

Cost is just one thing to consider when investing. Others are the risks involved, the length of time allocated and the investment objective. There are many more to consider as well.

That's why you should talk to your financial planner. Since you will be charged one way or the other, it's worth it if the right investment fits your investment plan.

Jim Zientara, branch manager and financial planner of Raymond James Financial Services, has an office at 11009 Gatewood Drive, Suite 101, Lakewood Ranch. He can be reached at 941- 750-6818.

Bradenton Herald is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

Commenting FAQs | Terms of Service