Asset Types

Every asset (identified by its ticker) must be assigned an asset type. This is typically done the first time a ticker is entered into the system, using the Quick Pick dialog. Behind the scenes there is a list of all asset types, as in this example.

 

The list is the same as the Quick Pick list. BalancingAct starts with a default list that you can customize to suit your preferences. Use the Asset Types table to explicitly add or remove asset types. A type cannot be removed if any ticker is assigned to it. You can rename a type by selecting it and reentering the text.

The table also shows typical bid-ask spreads. You lose a little money for each buy or sell transaction when there is a bid-ask spread. Spread is specified either as dollar per share or as a percent.  Dollar value (i.e., followed by $) is the default. To specify percent, be sure to enter % following the numeric entry. These are representative spreads.  Adjust them if needed for your specific asset types.


Tips & Tricks

Actual spreads vary from moment to moment. Spreads are usually very small for stocks or ETFs with a high trading volume. The pragmatic approach is to use typical spreads for the types of assets in your accounts. You can usually determine spreads when you enter online trading orders.  Also, Yahoo Finance provides this information. Be sure to check during normal trading hours because after-hours bid-ask spreads are often misleading.

Spreads for individual bonds can be quite large. A retail investor should expect to encounter spreads of one or two percent. The result is that your spread loss can be much larger than the trading commission.

You lose one half of the spread for each trade. It takes a "round trip" (buy and sell) to lose the full spread. For example, buying an ETF with a two cent spread per share will cost you one cent per share. If you turn around and sell it, you will encounter an additional one cent per share loss.

As a retail investor, you can expect to be at a disadvantage compared to professional or high frequency traders. With that in mind, its probably best to err on the high side when estimating typical spread costs. Higher estimated spreads will result in a slightly fewer trades, on average,  because BalancingAct avoids trades unless the reduction in imbalance outweighs trading cost.

Keep in mind that spread costs are normally very small, except for individual bonds. Don't put too much effort into estimating spreads unless you trade unusual securities.