To be well diversified, suppose an investor wants to hold 30 different stocks. Discount stockbroker commissions are $7 per individual stock trade, of any share quantity.
A no-load stock mutual fund charges 0.3% expenses per year of assets under management. If the investor has $25,000 to invest and holds stocks an average of 2 years before selling, what is the total cost of each alternative over the 2 years?
If she has $100,000 to invest and holds stocks an average of 4 years, what is the total cost of each over the 4 years?
Assume a stable stock market over the 4 years, for simplicity in calculating dollar expenses.