Investing in wikifolios: The wikifolio fees
No hidden costs, no subsequent deductions
In calculating the value of a security in a notional reference portfolio, a certificate fee and a performance fee are taken into account. On wikifolio.com, you can already see the price information minus the certificate and performance fees until the preceding day. The return of the corresponding wikifolio certificate corresponds to that of the respective wikifolio – without hidden costs. As needed, the fees of your bank or your broker must be observed.
The wikifolio certificate fee
The wikifolio certificate fee is 0.95 percent per year and is calculated on a daily pro-rata basis in the wikifolio. Calculations are based on the components of the wikifolio. These are the virtual cash assets and the virtual stocks in the wikifolio at daily closing prices of Lang & Schwarz (bid price, ca. 11 p.m.). Both components together are the wikifolio equivalent. The amount of the respective wikifolio certificate fee is shown in the wikifolio detail view.
The wikifolio performance fee
The amount of the respective wikifolio performance fee is proposed by the trader and set by mutual agreement with wikifolio.com and Lang & Schwarz. With classic wikifolios, it amounts to 5–30 percent of the success achieved in the wikifolio and only becomes due upon reaching a new high watermark (new annual high) in the wikifolio. We call this the “high watermark principle”. The performance fee is split between wikifolio.com and the traders, who can receive up to 50 percent of the performance fee based on a predetermined scale. This trader portion of the performance fee is their success bonus. The total calculated daily performance fee is respectively shown in the wikifolio view. In the case of wikifolios of wikifolios, the performance fee is automatically set to zero as the calculation of the proceeds share is based on the accruing performance fee of the wikifolio certificates already contained in the wikifolio of wikifolios for more than a day.
An example of the performance fee calculation
You have acquired ten shares of a wikifolio certificate with the current value of 100 euros, the high watermark of the wikifolio is 102 euros, the performance fee is 10 percent. As long as the wikifolio stays below 102 euros, no performance fee that may affect the price of the wikifolio certificate is calculated in the wikifolio (regardless of the initial price).
Assuming the wikifolio reaches a value of 104 euros at the end of the day, the performance fee would be calculated from the difference between the old and the new high watermark. In this example therefore: (104–102)*0.10 = 0.20. The certificate value thus falls by 0.20 euros overnight. The investor has “paid” the performance fee via the change of the value and the high watermark is set to 104.
The two fee elements are charged within the wikifolio certificate. As far as the high watermark is concerned, it is to be considered that it is reset to the current index level of the respective wikifolio at the end of each calendar year (31 December). No extra costs are incurred for the purchase or sale of wikifolio certificates. You may additionally pay transaction fees at your bank or your online broker.
Special case: Wikifolios of wikifolios
No certificate fee and no performance fee will be deducted in the wikifolio of wikifolios. In this respect, we significantly differ from the common practice in the financial sector – because we consider duplicate fees for investors to be unfair. A wikifolio of wikifolios trader is remunerated directly and exclusively by wikifolio.com by means of a proceeds share. This proceeds share is up to 10 percent of the already incurred performance fee of the wikifolio certificates included in the wikifolio of wikifolios.
No transaction costs
The purchase and sale of securities is usually accompanied by transaction fees that reduce the returns. Since these fees are absolute amounts, they have a greater impact with smaller investments. No such fees exist with virtual trades in a wikifolio. A trader can restructure their wikifolio very dynamically, without any transaction costs being incurred for investors.
However, please note that the usual transaction fees accrue via your local bank or online broker in the course of buying and selling wikifolio certificates. In addition, depot management fees may be charged.