For investors, every trade may seem like a small transaction—but the costs can add up quickly. From Securities Transaction Tax and GST on brokerage to stamp duty, transaction charges and, where applicable, UPI-related charges, frequent trading can quietly eat into returns, particularly for high-turnover strategies and smaller-ticket transactions.

So, how much do these costs really matter for retail investors? And could the cumulative impact of multiple small charges become a meaningful drag on long-term wealth creation?

In this episode of ETMarkets Smart Talk, Varun Saboo, Head – Equities at Anand Rathi Share and Stock Brokers, breaks down the hidden cost of frequent trading, explains why the impact differs sharply between long-term investors and active traders, and shares what investors should keep in mind when evaluating returns after transaction costs. Edited Excerpts-

Q) We have entered an environment where geopolitical risks, global trade disruptions, currency volatility and shifting interest-rate expectations can change the market narrative very quickly. What does portfolio resilience actually mean in 2026?

A) It's no longer just "diversify across equity/debt." Resilience now means: (a) surviving regime uncertainty — not knowing if the next macro shock is a hike, a currency shock, or a trade-tariff shock;

(b) liquidity buffers so you're not forced to sell into a bad tape;

(c) genuine diversification across uncorrelated return drivers (not just asset classes that move together in stress);

(d) position-sizing discipline over prediction — you can't time geopolitics, so exposure control matters more than forecasting.

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Q) A possible Fed rate hike has suddenly become a key market risk. If the US Fed resumes tightening, what would be the immediate impact on Indian debt and equity markets?

A) If the Fed resumes tightening — impact on India

• Debt: Immediate pressure on Indian bond yields via imported rate expectations, FII outflows from G-secs, and a weaker rupee raising imported inflation risk — all pushing yields up, prices down. But some part of it is already factored, personally believe Fed will raise much lower than what US yields are showing

• Equity: Typically, negative in the short run — FII selling, higher discount rates hit high-multiple/growth names hardest, IT services (dollar revenue) may see relative resilience or even benefit from currency, however FII selling has already been quite aggressive last 3 years plus, don’t see this impacting markets aggressively from here.
• Magnitude depends on whether it's a one-off hike or a signaled cycle; markets often overreact to the first move, then stabilize once the new rate path is priced in.

Q) Could a stronger dollar and higher US yields put enough pressure on the rupee to constrain the RBI's room for monetary easing?

A) Yes, meaningfully. A weaker rupee forces the RBI to choose between defending the currency (intervention, tighter liquidity) and supporting growth via rate cuts.

Historically the RBI has prioritized rupee stability and inflation control when the gap between US and Indian real rates narrows — so easing room shrinks even if domestic inflation is benign. It's a real constraint, not just theoretical.

Q) Do you see UPI charge as essentially immaterial for long-term investors but potentially more relevant for high-frequency traders and smaller-ticket transactions?

A) ⁠Broadly yes. For a long-term investor doing SIPs or occasional lump-sum investments, a UPI charge (where applicable) is a rounding error against multi-year compounding.

It matters far more for high-frequency traders, small-ticket/frequent transactions, and thin-margin intermediaries where costs compound per transaction, not per outcome.

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Q) Is there a risk that multiple small charges across the investment ecosystem could eventually become a meaningful drag on retail returns?

A) Yes — this is a legitimate concern, especially for active/frequent traders. STT, transaction charges, GST on brokerage, stamp duty, and now UPI-related charges are each individually small, but stacked across high turnover they create a real drag — this is well-documented in why frequent trading underperforms buy-and-hold on a net basis. For long-term, low-turnover investors, the aggregate drag stays minor.

Q) Equity markets have delivered strong returns over the long term, but valuations in parts of the market remain elevated. Does resilience today require reducing equity risk, or simply becoming more selective?

A) Selectivity over wholesale de-risking, for most investors. Blanket exits based on valuation alone have a poor track record (markets can stay "expensive" for years).

Better approach: tilt toward quality/reasonable valuations, trim the most stretched pockets (parts of small/midcaps, momentum-driven themes), and use volatility to rebalance rather than trying to time an exit.

Q) India’s macro fundamentals remain relatively supportive, but global yields and capital flows can still influence Indian bonds. What gives you confidence in India’s debt market over the long term?

A) ⁠Structural, not cyclical: improving fiscal discipline trajectory, inclusion in global bond indices (JP Morgan, Bloomberg) drawing sustained passive FII flows, a relatively credible inflation-targeting framework, and a large domestic investor base (insurance, pension, EPFO) that cushions foreign-flow volatility. Global yield moves cause noise, not a structural derating.

Q) What is the biggest portfolio risk investors may be underestimating today?

A) ⁠Two candidates worth naming: liquidity risk in "safe-looking" instruments (people assume mutual funds, bonds, even some AIFs are as liquid as they were in normal times — that assumption breaks first in stress), and correlation risk — many portfolios that look diversified on paper are actually all leaning on the same macro bet (falling rates, stable dollar, calm geopolitics) and will move together exactly when it hurts most.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)