Research shows that costs are the strongest predictor of future returns.1 One of Movement Capital’s top priorities is to make investment costs as low as possible. The cost of implementing an investment strategy is a function of fund expense ratios, slippage, and commissions.

Expense Ratios

Expense ratios are the underlying fund fees for each ETF. Unlike management fees, expense ratios aren’t explicitly paid. Instead, they come out of fund returns. For example, an index fund with an expense ratio of 0.1% should be expected to lag the index by 0.1% per year. Expense ratios have decreased over the past few decades, now providing essentially free global access to all major asset classes.

Movement Capital uses the following Vanguard ETFs. VGIT (regular Treasury bonds) is only used in tax-deferred accounts, and VTEB (tax-exempt municipal bonds) is only used in taxable accounts.

ETFAsset ClassExpense Ratio
VTIU.S. Stocks0.03%
VXUSInternational Stocks0.09%
VGITTreasury Bonds0.07%
VTEBMunicipal Bonds0.08%
VTIPInflation-Protected Bonds0.06%

The average fund expense ratio for Movement Capital’s overall strategy is 0.07%.


Slippage represents the cost of trading into and out of an asset. For example, let’s say an ETF’s highest bid price is $100.00 and its lowest offer price is $101.00. That means there’s a $1, or 1%, spread between the highest price you can sell at (the bid) and the lowest price you can buy at (the offer). This is an extreme example of a large price spread. The main point is that data on an active investing strategy must reflect realistic slippage costs.

VTI’s current spread between its bid and ask is 0.02%. VXUS’s average spread is 0.03%. The average spread for the bond funds is 0.02%. If the trend model were to rotate from VTI to VXUS, it would incur the slippage of selling VTI and buying VXUS. Movement always submits orders with a limit price to execute at the midpoint of the bid and ask. This means an active strategy doesn’t necessarily pay the full spread when selling or buying. Here’s an example with real-world numbers:

Sell VTI, paying half the spread = 0.01%

Buy VXUS, paying half the spread = 0.015%

This total transaction incurred slippage costs of 0.025%. If there were two of these trades in a year, the strategy’s annual slippage would be 0.05%.

It’s important for a strategy to reflect historical slippage, not just current data. Markets were less liquid than they currently are. This is why I increase slippage estimations in historical data.

Only the trend and macro models incur slippage since they are the only active models. Historically, the average annual slippage for the trend model is 0.05%. The average annual slippage for the macro model is 0.04%. So the two active models have an average annual slippage of 0.045%. In an scenario where these two models occupy 50% of a portfolio along with 50% in passive models, total annual portfolio slippage would be expected to be 0.0225%.


On average, there are five trades per year across all models in the Movement Capital composite strategy. The estimated commission per trade I use is $10 to be overly conservative in historical testing. Most trading platforms offer more competitive rates, but as in the slippage estimations, it’s best to be conservative and reflect higher costs than currently available.

To calculate commissions as an annual percentage like the other costs, just divide total estimated annual commissions paid ($10 * 5 trades) by an account’s value. For a $500,000 account, $50 in commissions translates to an annual cost of 0.01%.

Total Cost Summary

The table below shows the annual cost of running Movement Capital’s composite strategy in a $500,000 account:

Type of CostAnnual Average
Expense Ratio0.07%

This total implementation cost is below the 0.15% fee for Vanguard’s target retirement funds and substantially below the average ETF and mutual fund fee of 0.52%.2