What Is the Ideal Amount of Shares a Beginner Trader With Little Money Should Have?
Published April 29, 2021.
Investing in the stock market can be a highly profitable endeavor, but it can also be quite intimidating for beginners. In this article, we will examine one of the key issues for beginners to consider, which is the ideal amount of shares that they should purchase initially.
Firstly, it's important to note that every investor’s circumstances are different, but if you have a small amount of money to invest, you should pay heed to the following factors.
The costs involved are naturally critical in deciding on the number of shares to purchase. Beginners may not realize that you pay commission on stocks, particularly at brokers online, so you should calculate this before entering any purchasing decision. Usually, the figures involved are fractions of 1%, but this can still make a difference to your overall investment position.
The number of shares that you choose to purchase should also depend on the stock price you wish to buy. Pricing can vary wildly, with some stock worth thousands of dollars for one unit and others worth mere cents.
If possible, it is usually advisable to diversify into several different stocks, so this can form part of your decision as well. By diversifying, a trader lessens the risk associated with a particular stock diminishing in value, which is certainly advisable for beginners.
Finally, the amount of money that you have to invest as an initial deposit is also important. If you have thousands of dollars, you can opt for one of the more expensive stocks, whereas smaller amounts of investment would tend to be better suited to some of the lower value equities.
Finally, many sites offer test accounts, which are certainly worth using before entering real-world investing. As a general rule, beginners to trading should start with a small amount of stock and get used to the general processes involved.