Preface
Should you or any of us be worried about transaction costs incurred in investing? Maybe so, like anything else it depends on what you’re invested in. Let me ask you this question, should you ever expect to pay nothing to buy and sell assets(?) because that answer is a resounding “No”! Investments themselves care not whether you make a profit or a loss because there’s people behind the tape that depend on investors paying them for the privilege of converting their dollars into asset values and then re-converting asset values back into dollars to complete the circle, get it? And the truth is that transaction costs across various asset classes are like people, they’re not all alike, transaction costs come in a wide assortment of flavors and sizes. The truth is that the costs associated with buying, selling, and even just holding invested assets can sometimes surprise us! So before you invest in a-single-thing, you should always be aware of what to expect to pay both on the purchase and the liquidation of any personally held asset.

The Nitty Gritty of Transaction Costs
I have never believed firms like Vanguard and Fidelity when they say that investors should always pay the lowest costs possible in order to insure a better investment outcome. That’s total bullshit! In fact, I remember running money for clients where we selected the purchase of Vanguard funds a few times. Their Vanguard funds underperformed other funds I held in that same category with higher costs during that same time period. Once that took place for my clients two or three times I never purchased another Vanguard product again. Meanwhile, this idiot organization consistently ran commercials telling every investor that the cost of investing is the only thing they should consider, it’s the main driver in performance over time. Wrong! Investment advisers are professionals and the investment firms they are employed by in the financial industry are highly regulated professional organizations. One should never expect what a licensed professional delivers to you to be free of costs. Those costs keep their doors open so expect to pay them, always. However, there are situations where transaction costs can be waived. In cases like these it simply means the firm and advisors are making their fees in other ways, which is fine but how? Most funds, whether a money market, a mutual fund or an ETF, contain an internal cost. Percentages of those fees are sometimes shared by the makers/managers of that product with the firm [and maybe the advisor] who recommended the product. Those fees can be received for as long as the investor holds their product inside client accounts. Another common occurrence these days is to waive transaction costs [on certain transactions] for high net worth investors based on assets held at the firm. This just means the firm is able to generate fee revenue in other ways. The loaning out of securities and/or cash held inside high net worth client portfolios, as well as interest earned on mortgage and margin loans are some of the ways to circumvent commission charges.

Ranking Transaction Costs From Very High to Very Low
It’s time to rank the costs of buying and selling assets based on category. I have listed the transaction costs incurred to buy or sell investments below from the highest or “Worst” to the lowest or “Best”. Always remember that transaction costs are a function of “liquidity”, and one of the main drivers of liquidity is simply time (t).

Personal Collectibles/Luxury Goods Are in the Highest Transaction Costs Category! [No surprise here]
Asset Types: Fine Art, Wine, Jewelry, Precious Metals, and Antique Vehicles.
Notes: This investment category includes holdings of Gold and Silver bullion in the form of bars and coins. The costs associated with liquidating hard assets like these into cash can be shockingly high, so make sure you understand that before putting much of your savings into these investments. In my opinion, owning assets in this category only makes sense for the super wealthy among us.
Transaction Costs: Extremely High. High valuation fees, auction house premiums (can exceed 10–20%), plus the cost of storage. 

Residential & Commercial Real Estate [Ouch! Just Ouch!]
Asset Types: Homes, rental properties [including single family homes, townhouses, condos], and raw land.
Notes: Way too many personal investors calling this category “home” these days without realizing all the costs associated with investing in rental property especially. The ongoing costs of maintaining rental property along with the high transaction costs makes zero sense to me [unless it was the only investment in the entire world, which it is not]. So expect your money to be flying out the door whenever you invest in rental property(ies).
Transaction Costs: Very High. Includes agent commissions (often 5–6% of sale price), closing costs, legal fees, and inspection fees.

Private Equity and Hedge Funds [This investment category is very hit and miss out there]
Assets: Private company investments, specialized funds.
Notes: There exists limits as to who can be offered investments in this category, usually clients will need to meet net worth and/or income thresholds designed to insure suitability given the risk and illiquid characteristics in Private Equity offerings. Hedge Fund fees are ridiculous in their own right, not only do they charge annual management fees of 2 to 3% of assets under management but most hedge funds also carve out 20% of a client’s annual gains. So always ask lots of questions before investing in this category.
Transaction Costs: High. Involves substantial management fees, performance fees, and limited liquidity.

Mutual Funds [These days investors must consider tax implications and mutual funds are about the worst tax planning tools out there.]
Assets: Actively managed or index mutual funds.
Transaction Costs: Moderate to High. Some funds have “loads” (commissions) ranging from 1% to 2%.

Bonds (Fixed Income)
Assets: Corporate or municipal bonds.
Notes: The text I researched for this paper has described transaction costs for individual bonds as not high or low, but “moderate”. I would describe purchasing or selling individual bonds as relatively low in terms of cost. Bond trading desks themselves survive by adding in a small fee per bond on the buy or sell side, but again, usually pretty small, not even approaching 1%. However, larger transaction costs can apply whenever purchasing or selling bond funds so be aware of these.
Transaction Costs: Moderate. Often involves a wider bid-ask spread than stocks, which acts as a hidden transaction cost.

Public Equities and ETFs
Assets: Stocks and Exchange Traded Funds (ETFs).
Notes: Herein lies the biggest change to transaction fees ever over the past two decades. Due to SEC regulations designed to reduce client transaction costs as well as competition among all the major Wall St. firms to gain high net worth clients, the costs of transacting stocks and Exchange Traded Funds (ETFs) has persistently fallen. Many firms today also waive these costs for clients managing their own investments as long as their assets on deposit exceed certain threshold limits, usually beginning at $1 million dollars.
Transaction Costs: Low commission fees (often can be $0, read above) and otherwise narrow bid-ask spreads.

Cash and Cash Equivalents (Lowest Costs)
Assets: Checking/savings accounts, money market funds, Treasury bills.
Transaction Costs: Generally zero cost or near-zero, especially with no-load money market funds.

Key Take-Aways
I would say after reading this material if you hold investments in one or more of these categories be aware of your [personal] exposure to transaction costs. Will transaction costs be a burden on your investment goals? They can be especially for those who have significant exposure to categories such as hard assets including real estate. I bet you right now that 50% of the people who invest directly in precious metals whether they be in the form of bars or coins are not aware of the costs associated with turning those items back into cash. And if owners plan to leave that to their children or other heirs they will have to deal with it as it carves up what they receive, even the thought of it is kind of ugly. The same thing applies to leaving heirs with rental property investments that they must deal with dissolving. Always remember, liquidity is a virtue often overlooked by those who have never served in the brokerage industry in any capacity. In simple terms, the harder it is to find a buyer for an asset, the more it will cost to liquidate that asset back into cold hard cash!