Transaction costs

Transaction costs seem to be poorly understood by the general public. For example, it costs money to buy a house. It costs money to sell a house. People often don’t take these costs into consideration when they imagine their house investment. If you buy/sell a house every few years, that’s a major hit to your bottom line. It might even destroy your investment. (Houses should not be investments, but that’s a rant for another time.)

The common 1% financial advisor fee is another example. It is deceptively large and in general you should avoid it.

Big, sophisticated companies should know all about transaction fees. Maybe?

The Japanese tech conglomerate, run by billionaire Masayoshi Son, spent a staggering $894 million on investment-banking fees in 2018, according to financial-data company Refinitiv, securing financial advice on deals and procuring an array of bonds, loans, and equity investments. 

That’s not the highest total for any company just last year but the highest in at least the past decade. 

The next highest fee payer in 2018, German pharmaceutical giant Bayer, is leagues behind at $384 million — 57% less than SoftBank

SoftBank spent $900 million on investment-banking fees in 2018

You have to make a lot of money on your investments to make up for a one-year $894M investment fee. That’s not just $894M now. That’s more than $1B in three years at 3% returns. That’s well over $2B in 10 years at 10% returns. Take whatever you were going to make on those investments and lop off a few billion immediately.

Maybe Softbank knows what it’s doing? Maybe?