11-10-2014, 03:07 PM
(11-10-2014, 02:56 PM)hendi_alex Wrote: 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.
I also try to keep my costs under 0.5%. Most websites charge $5-7 per trade, so as long as I spend at least $1000-1400 per stock purchase I am good. This does limit the number of trades you can do in a period, but that may be a good thing.
