gathering.Itwillbelessofanissueforlong-terminvestment
strategiesbased uponpublicinformationand forcontrarian
strategies.
Costs of Trading Nontraded Assets
Ifthecostoftradingstockscanbesubstantial,itshouldbe
evenmoresignificantforassetsthatarenottradedregularly
such as real assets or equity positions in private companies.
- Realassetscanrangefromgoldtorealestatetofine
art,andthetransactionscostsassociatedwithtrading
theseassetscanalsovarysubstantially.Thesmallest
transactions costs are associated with
commodities—gold,silver,oroil—sincetheytendto
come in standardized units. With residential real
estate, thecommissionthatyou havetopay a real
estatebrokerorsalespersoncanbe 5 to 6 percentof
thevalueoftheasset.Withcommercialrealestate,
commissionsmaybesmallerforlargertransactions,
but theywillbewellin excessof commissionson
financial assets. With fine art or collectibles, the
commissions become even higher. If you sell a
valuablepaintingthroughoneoftheauctionhouses,
youmayhavetopay 15 to 20 percentoftheselling
price of the painting as a commission.
Whyarethecostssohigh?Thefirstreason isthat
there are far fewer intermediaries in real asset
businesses than there are in the stock or bond
markets.Thesecondisthatrealestateandfineartare
not standardized products. In other words, one
Picassocanbeverydifferentfromanother,andyou