Transaction costs and young investors

[hendi_alex]

I've noticed where quite a few young investors seem inclined to buy modest amounts of each ticker, paying really high trading costs as a result. I would recommend that those individuals buy shares of an appropriate ETF which can be bought commission free. When the value of the ETF gets to a decent level, sell shares and buy an individual ticker if that fits the investment theme better. Buying the ETF say of a dividend aristocrats type of ETF or blue chip ETF would keep one from missing out on market upside. Such a strategy could easily move transaction costs to 0.5% or less. That is the threshold for me. Won't pay more than 0.5% transaction costs, but usually try to keep the buys at about the $5000 level or higher in my modest retirement portfolio. For a young saver, it would seem that keeping purchases above $750 or $1500 should be easy enough. Up front costs or 2% or more is just too costly and will really hurt performance in later years.