Just the idea of buying stock can be so overwhelming that you would rather go to the commissary on payday.
I can still remember my first stock purchase. Flush with excitement from weeks of research, I opened my brand new brokerage account app on my phone. This was it, at 28 I was going to be a stock owner. Not just some funds in a retirement account, but real single stock, that was my investment into a company I would then own a part of.
Clicking “buy” made me feel like Mulan meeting the emperor. Until I saw the transaction fee added on, then I felt more like Gaston covered in mud. I made a mistake when buying stock.
Watch out for that Fee!
There are the basics of “how do I buy stock” to “what stock do I buy” but my big mistake when I made my first stock purchase had little to do with what I bought, but everything to do with how I bought it.
I only bought 1 share of stock. With a budget of $100 I could have bought 9 shares of a $10 stock, or 5 of a $17 stock or 1 of a $60 stock. I thought nothing of the price of the stock and only of the company.
This $60 a share company was the one I chose and now that I chose it after weeks of research I wanted it, darn it!
Spread the Fee out.
$9.99 transaction fee for buying stock is very competitive and worth every penny for the educational value my on-line broker gives me.
And $9.99 spread over 10 stocks is ok, spread over 100 is awesome. $9.99 on one stock? That’s where the mud feeling comes in.
When the math bites you.
So with my first stock purchase, I paid $69.99 for a $60.00 stock or 15% in fees. Ouch. If I had gone with one of the other companies on my short list, I could have bought more stock for the same fee and spread it out.
I could have paid $11.11 for a $10 stock and only had 10% in fees.
The Big lesson so you don’t make a mistake when buying stock:
You can buy stock with a small about of money, but you just have to plan around the transaction fee.
Now instead of buying a few stocks every pay period with $100 each time, I wait till the end of the month and have $200 at once. The transaction fee of $9.99 is the same either way, but now I get to spread it over more stocks.