Purchase Size: What Do You Do?

[Be Here Now]

(04-05-2014, 11:26 AM)hendi_alex Wrote: I don't understand this preoccupation with cash 'burning a hole in the pocket'. I prefer to let the fresh cash both from dividends and from new savings accumulate until the market presents some obvious bargain.

I'm with you Alex.

I DRiP some of my positions and accumulate dividend cash from the others. I keep a list of stocks I want to buy, I have a minimum yield price point I am willing to pay for each, and I regularly monitor their charts to see when market psychology is presenting me with buying opportunities. When all of the above are aligned, and if I have the cash (of course!), I will buy.

I am not concerned with purchase size because I get 100 free trades per year in each of my accounts. Automatic reinvestment does not count as a trade. My broker no longer offers this option or I would recommend it.

The SA author who writes the 'MyMadMethod' series (forgot his name) trades in very small lots. He uses Interactive Brokers to keep his costs down. I looked into them and they certainly were cheap, much better than any of the others.

[Kerim]

(04-04-2014, 10:06 AM)TomK Wrote: Of course I think that minimizing commissions is important, but it should not prevent anyone from building their portfolio. If you only have a little bit to invest each month, then you do the best you can, but don't keep you money on the sidelines to avoid an $8 commission. Especially in the early stages, it is important to get your money into the market and working for you.

(04-05-2014, 11:26 AM)hendi_alex Wrote: I don't understand this preoccupation with cash 'burning a hole in the pocket'. I prefer to let the fresh cash both from dividends and from new savings accumulate until the market presents some obvious bargain.

I agree with a combination of these positions. If the market is presenting good opportunities, but you only have a small-ish amount to invest, I wouldn't let the opportunity slip just to build more cash to lower the commission (as a percentage of the purchase). But regardless of how much you have to invest, it is not prudent to over-pay for the stocks you want. Of course there is some grey area in the middle, but everyone has to find their own balance there.