Determining How Much Stock to Buy

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Determining How Much Stock to Buy

So far you know what stock is, you know what a brokerage account is, you have opened either your cash account or your margin account, and you've decided you are ready to buy some stock. Now you need to determine what size trade you wish to purchase. Careful attention and thought in this step can save you a lot of money.

Plain English

The size of your order means the number of shares of stock you wish to trade.


For example, most service charges are per transaction, not per size of the order. Thus, a single purchase of 100 shares of XYZ Company at a dollar per share will cost you $107: $100 for the stock and $7 for the purchase order. In contrast, 10 separate purchases of 10 shares of XYZ will cost you $170: $100 for the stock and $7 each for the 10 purchase orders.

You can see how quickly and how dramatically the size of the purchase makes a difference in your profit. In the first example, the value of your stock has to rise by 7 percent before you actually begin to make a profit from your stock purchase. In the second example, the value of the stock has to rise by 70 percent before you can begin to make a profit. That's going to take a lot longer.

When purchasing stock, you will need to select one of the following two options:

  • Round lots

  • Odd lots

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Stock Market Investing 10 Minute Guide
Stock Market Investing 10 Minute Guide
ISBN: 0028636104
EAN: 2147483647
Year: 2000
Pages: 130
Authors: Alex Saenz

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