Friday, April 3rd, 2015

Would it be better to invest, say $100 or $1000, in one chosen stock a month or split among my portfolio?

Well, as you can tell, I’m green at this in reverse. I’m still trying to weigh out the commissions. So I say, I’ve come up with an investment strategy with six measures, and target percentages for the portfolio. Would it be better to invest in a different population than a month (at say $ 5 a) trade to target rates are met or pay a monthly fee (eg $ 15 for 6 transactions per month) and contribute to the target percentage all my stock of every month. The problem I have with the first option is that after making an investment in an action in a month, may take 6 months until it is about investing in it again. I have heard pros and cons want to know if I’m missing something. One way to save on commissions of 5% versus 15%, moreover, capable of maintaining active investing a little each month. Any ideas?

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2 Responses to “Would it be better to invest, say $100 or $1000, in one chosen stock a month or split among my portfolio?”
  1. Christian Brown says:

    If you only have $1000 to invest you probably are going to want to just put it all in one company or maybe 2. Having a diversified portfolio and a group of stocks that fit your growth target is outstanding however the way commissions work will be a huge drag on your investment when you only have $1000.

    Essentially if it’s gonna cost you $5 per trade, $5 is about .5% of $1000. That’s just for buying the stock. If you sell it a few years down the road then you have just lost another $5 or .5% for a grand total of 1% lost due to commissions.

    That isn’t too bad, but if you divide the $1000 among 10 different stocks and have to pay the commissions for all ten of them then you are really getting the beat down from the man. $5 is 5% of $100. That’s just buying in, if you sell you have to pay another 5%. In other words you are losing 10% just for entering the position. That’s a real rip off since 10% would be a nice 1 year return!

    For this reason since you don’t have a lot of money, find the stock that you believe is the strongest, most resilient, and best priced stock and just throw all $1000 at it. You will pay the least in commissions that way. Yes diversifying is a great thing and I am all about it, but in this case it will work against you. Besides if the company you choose is good, you should have very little to worry about. And even if it goes bankrupt you’re only losing $1000. That would suck, but that isn’t exactly betting the farm.

  2. Jason V says:

    If it were set up into an IRA you can use additional investments to meet your model. The only downside is the annual cap of an IRA. In a personal account I’d do 2 stocks a month at $300. After 3 months you can use subsequent investments to meet your model. With dollar cost averaging the more frequent you can invest the more it can help your returns. With commissions though buying larger blocks with make it easier to make up the costs.

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