How Much Should You Invest in Each Stock or Fund?


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Dear SmallIvy,

 Got an investing question? Please leave it in a comment.

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Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

2 thoughts on “How Much Should You Invest in Each Stock or Fund?

  1. This is a really is a really useful lesson. When I first started investing paid $14.95 per trade and bought in $500 lots. Now I pay $11 (prices have come down) and purchase much like you suggest SI, in $2000 + lots. This keeps brokerage fees at an acceptable level. One way I found to reduce my average brokerage on these small purchases was to buy more of the stock, provided it still appeared undervalued /fair value. In Jaqueline’s examples it might be buying another $2000 in Apple later this year. When it comes time to sell, say in 10-30 years, she’ll only pay once for brokerage, so her total brokerage charge would be averaged down to a reasonable % of her cost. Another plus is that the holding will now make a meaningful and similar contribution to her portfolio as her other future holdings.

    • I actually started investing when all there was was full service, so I’m used to paying $50+ per trade. It also cost more at that time to buy in odd lots – numbers not divisible by 100 – so I’m used to avoiding that. I’m actually still with a full-service broker, partly for the services they provide, partly out of sentimentality (it’s hard to “break up” with a broker), and partly out of inertia. The thing is, however, since I’m buying in large amounts for 10-20 years at a time, commissions don’t matter that much. It probably helps me to avoid overtrading.

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