How many shares of stock should you buy? There is no one answer to this question, as it will depend on your personal goals and financial situation. There are however a few basic guidelines that you can follow.
How Many Shares Can You Buy?
The most basic question is how many shares you can buy. If you have $1000 and want to buy company XYZ that is currently trading at $10 per share, then you can buy 100 shares. This is assuming there is no commission for buying, More on that later.
Is There a Commission to Buy?
Is your broker charging a fee to buy stock? If they are, then consider finding one that doesn’t. If however, you stick with your current broker, then you will want to buy enough shares per purchase to justify the commission charge.
Back to our example of company XYZ. If their current share price is $10, and your broker charges $5 per transaction, then buying 1 share doesn’t make sense. 50% of the share price would be paid in commissions in this example. Buying 100 shares however would make the commission only 0.5% of the purchase price.
Recently, some brokerage firms have started to allow their clients to buy fractional shares. There are two main advantages to having the ability to buy fractional shares of stock.
New investors have access to higher priced stocks when they can buy a fractional share. If company XYZ’s stock jumps to $100 a share, then a new investor with $50 to spend could buy 0.5 shares of XYZ.
The other advantage is being able to invest all your available money into a stock. If XYZ is trading at $100 per share and you have $150 to invest, then you could buy 1.5 shares of XYZ.
Keeping your portfolio balanced is another factor in determining how many shares to buy. If you find that your portfolio is becoming heavy in any particular sector, then you can rebalance by buying more shares of a stock in a different sector.
Many experts recommend holding somewhere between 15 to 30 different stocks, so spreading your money around while not becoming too concentrated in any one sector can help diversify your portfolio.
How many shares of stock should you buy? The answer to this largely depends on your personal situation and goals, but there are a few guidelines to follow.
How much money you have, possible commission charges, the ability to buy fractional shares, and diversification are all things to consider when purchasing stock.
Writer and Investor. Based in the Pittsburgh, PA area, Brian holds full-time employment as a Warehouse Manager for an electronics firm. Brian enjoys wealth building, investing, gardening and the great outdoors. Brian holds a B.A. in Environmental Studies from the University of Pittsburgh and an MBA from Robert Morris University.