The stock market had a bit of a dip the past 2 weeks so I took advantage by adding to my portfolio. I still find it hard to gauge when to hold off and wait for a better price and when to jump in, but overall I think I’m getting the hang of it.
I feel like the hardest part of trading is knowing when to sell. It’s counterintuitive, but you never want to sell high because you become convinced the upward trend will continue indefinitely and you always feel motivated to sell low because you become certain all your money is being lost. It might take some time to train yourself to think the opposite, as familiar as the mantra is: buy low, sell high.
As a general rule, I try to purchase stocks I will hold for 5 years or more. Having a long-term perspective keeps me from making impulse decisions at temporary market highs and lows. Right now, my goal isn’t to add new companies to my portfolio, but instead bolster my current investments. I’m really happy with the selections I’ve made so far, and see a lot of long term growth for all of them, which is why my main motivation right now is to increase these investments instead of seeking new ones.
If you are a small investor (ie. a portfolio of less than $50,000) it doesn’t make any sense to hold more than a handful of different stocks. At best, it’s just too many tickers to watch, and at worst you’re paying too many fees on too small buy-ins.
There are investing blogs for every kind of investor, but I tend to side with the ones that encourage putting the bulk of your money in a select few shares, as opposed to dividing up a small amount over a dozen or more.
My portfolio is in the low five figures and I hold 7 different companies (1 of them is because another stock in my portfolio split, so technically I’ve only bought 6!). This is breaking my own rule to stick to 5 with under $20,000, which is exactly why I’m waiting for my portfolio to grow a bit more before I buy something new!
Nevertheless, it’s totally personal preference, and if you’re comfortable owning a dozen stocks with only $3,000 that’s you’re perogative — but it’s a lot of numbers to watch for such a little bit of money!
Buying and selling stocks can be expensive due to brokerage fees, so I always proceed with caution. I use an online brokerage to keep costs down. Depending where you live, different online brokerage firms will be available to you, but there will be some options to choose from.
When selecting an online brokerage make sure to look for:
- the minimum amount of money required to open account (some start as low was $1,000)
- the minimum amount of money you can transfer in and out of the account in one transaction (mine is $200)
- FEES! Most brokerages will charge you anywhere from $5 to $35 per trade, but read the fine print to see if there are any monthly account fees or transfer costs when you open your account.
- the costs associated with what you plan to buy. Both stocks and ETFs can be purchased online, and these have different costs associated with them — for example, Questrade has a $5 fee to buy most stocks but it’s free to buy ETFs.
Investing in the stock market is higher risk and more fees than keeping your money in a traditional bank account, but it has the potential for greater growth. Most people find these barriers too intimidating to overcome, but I’m still a big advocate that investing in the stock market is easy and fun.