I recently joined the Motley Fool and with the intent to dabble in the market with some play money.I'm a civil service employee with a almost 500K, but I haven't had a personal investment account until recently. I started with $1,000.00 and will add to it monthly but I wanted to begin my investing with low cost stocks that has lots of potential. However, what I continue to see are suggested stocks that have high share prices and haven't seen any or very few suggested buys below the $10.00 mark.Am I missing something or is this the high roller table and there are no $5.00 Blackjack tables available?Please advise,Dan
Don't be overly concerned about the price of a stock compared to another stock. Ten shares of a stock at a price of $100 has the same value as 100 shares of a stock at $10.Having said that however I would caution that when a stock price gets very low close to $1.00 it is often a bad sign for a company that is in financial trouble.
Welcome to The Motley Fool! Here's what you're missing. One trap many fools fall into is thinking too much about how many shares they own and not enough about the value of those shares. They think they are somehow doing better buying a lot of shares of cheaply priced stocks rather than just a few shares of more expensive companies. But the market price of a share of stock is completely dependent on the total market value of the company divided by the number of outstanding shares. The higher the market value, the higher the stock price. The more outstanding shares, the lower the stock price. However, neither market value nor the size of the shareholder pool is a measure of performance. Regardless of whether you own 1000 shares at $1 per share, 100 shares at $10 per share, 10 shares at $100 per share or 1 share at $1000 per share, you still own $1000 of that company, and if the share price goes up 10%, you've gained $100 any way you split it. If there's a company in which you would really like to invest but is too expensive for your available cash, just wait until you can save enough for a share.Many Fools follow the unofficial 2% Rule, which says the transaction cost of a buy transaction should be no more than 2% of the value of that transaction. So if you pay $7 per trade with TD Ameritrade, the minimum investment amount would be $350. If you pay $5 with Fidelity, the minimum amount would be $250. This isn't giving you a maximum - just telling you what your minimum should be. Another unofficial rule many Fools follow is buying in thirds. Let's say you want to purchase about $1000 of a company. You would buy $350 now, then another $350 on a future dip in price, again the final $350 down the road when the price is again at a discount. This is a form of dollar cost averaging which can even out your cost basis. Not relevant if your investing through a tax-advantaged account, but important if you are watching your potential capital gains and losses.If you are a member of one of the premium subscription services, I would start with the Best Buy Now recommendations which are also Starter Stock companies, followed by the remaining Best Buy Now recommendations, then the remaining Starter Stock companies. Your Analyst Team thinks the active recommendations are good long term, buy-and-hold opportunities, so the current market price isn't as important as how long you hold the position. Another trap Fools try to avoid is investing emotionally in reaction to significant news or large price swings. Fools try to never make investing decisions out of fear or panic, or unfounded optimism and irrational hope. It's not that Fools embrace risk but that we try to manage it through research and rational decision making. It is said that fools rush in, but Fools invest with purpose.The motto of The Motley Fool is to Educate, Amuse and Enrich. You'll notice that enriching comes last and education comes first. And bridging the gap is amusement. So take advantage of the resources TMF has to offer to learn about investing as you build wealth for the future, and have fun during the process.FuskieWho thinks the most important thing is for you to get started and to ask lots of questions, because that is how you learn and grow as an investor...-----Ticker Guide for The Walt Disney Company (DIS), SodaStream (SODA), Live Nation (LYV), CME Group (CME), Mongo DB (MDB)Disclaimer: This post is non-professional and should not be construed as direct, individual or accurate adviceDisclosure: May own shares of some, many or all of the companies mentioned in this post (tinyurl.com/FuskieDisclosure)Fool Code of Conduct: http://tinyurl.com/FoolCode
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