How Much Stock Should You Buy When Building Your Portfolio? | Personal-finance

Stock Advisor returns as of 2/14/21

Demitri Kalogeropoulos: As you mentioned, there’s a wide range there in terms of what kind of portfolio you want to have. But a good rule of thumb that I had heard is in terms of transaction costs, you want to keep your fees in general around 2% or less, I would say in a purchase. Just to put some numbers on that, for example, if you’re paying $10 for the purchase, that would put you at about $500 initial investment and you’d be paying 2% there.

But a lot of brokers, those numbers have come down a lot and it’s not too hard to find brokers that don’t charge anything. I have three accounts, I don’t think that I pay any transaction costs. That’s the only hard number I would steer away from. It can be difficult if you’re making like $100 purchase and you’re paying somewhere in that $10 range for transaction fees. You’re starting off with a 10% in the hole there, so I would avoid that.

But otherwise, I wouldn’t think there’d be any minimum. What you can do, I like to do consistent purchasing once a month or every couple of months, or whatever you can do, try to get in that habit and don’t be afraid to make a small initial purchase and buy a stock over time.

I know a stock advisor and some other places have talked about buying in thirds, I like doing that myself by making an initial purchase and then it can be small, and watch that company for a quarter or so and then maybe buy again. Those are just a couple of good strategies, but way to go.

Read more…