UnThreaded | Threaded | Whole Thread (5) | Ignore Thread Prev | Next
Author: mjs111 Big red star, 1000 posts Feste Award Nominee! Old School Fool Coverage Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 122  
Subject: Re: Portfolio Mangement Date: 9/18/2010 1:18 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
Hi, Danny!

This board is not very active. I'd try posting your question on the Investing Beginners board in the Learning to Invest section.


That said, I wanted to talk to you a bit about commissions and how they can really eat into your returns when you are buying in small increments. Let's say your broker charges you $10 per trade. That means you will lose 2.5% of your principal of $400 the minute you make your trade, and will have to make a 2.6% gain from there just to break even back to $400. And we didn't even talk about the $10 commission when you sell!

It takes a lot of work and experience to be able to beat the S&P 500 by a few percent every year on average (the "on average" is important: you'll never beat it every year), but a sure fire way to prevent this is to start a few percent in the hole due to commission costs.

What I would recommend is to make sure that commission are no more than 1% of your principal. With a $10 commission this works out to investing $1,000 at a time. Instead of investing every month, send the money to a high yield savings account until you have saved up at least $1,000 and make your trade then.



Mike
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (5) | Ignore Thread Prev | Next

Announcements

Foolanthropy 2014!
By working with young, first-time moms, Nurse-Family Partnership is able to truly change lives – for generations to come.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Macro Economics

Economic Implications of Cuba
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement