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Hi everyone,

I started investing about 6 months ago and want to know if it is recommended for me to continue my strategy . My goal is to own 15 companies and no more. I currently own shares in 4 companies and have $400 dollars to invest every month. Should I invest those $400 every month in different companies until I reach 15 and then start adding shares to each? Or should I add more shares to the 4 I own now and then move on to the 5th? I feel that $400 isn't enough for one company if I want high returns. I hope this makes sense. Lol. Thanks guys!

-Danny
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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
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Thanks for your reply Mike!
My broker is etrade and it does cost me $9.99 ($10) per share. I didn't think much of the commission fee but since you gave me an example, i see it can really hurt my returns. Since i want to own 15 companies, should i use $1000 for all 15 then add more shares to each after? I don't feel $1000 will be enough for high returns.

-Danny
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The commission fee will kill you when investing in small amounts. If you are investing small amounts make sure to calculate how much a hit the commission will take out of your returns. Much more than a percent will be a big hole to crawl out of.

I don't feel $1000 will be enough for high returns.

Not sure what you mean by this. You can make 10% on $2.00 and 10% on $200,000. Both would qualify as a high return percentage-wise.

As well, if you are just starting out the focus is going to be more about protecting the downside, not high returns. You will make mistakes.



Mike
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Cashinasnap:
You had, in an earlier reply indicated that a tracking program is very important to track investments.
I have been trying to write a MS ACCESS (2010) program to track my investments and so far have been very unsuccessful. Do you know of such a program that I can download unto my computer?
It must be able to track not only stocks but also cash covered puts, covered calls, etc.
Would appreciate if you can guide me to such a source.
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