How Many Shares Should a Beginner Buy?

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( — December 24, 2019) — Beginners should think prudently before they start investing in the stock market. There are some important considerations such as share price of the stock, commission amount to pay, risk chances, amount of money to invest. It shall help make an informed decision in making the right investment in the share market. 

However, there is no such absolute number of shares that beginners can buy. They can try to understand what would be the best shares to buy by understanding the condition of the stock market shares. 

Determining factors to decide on the number of shares to buy 

If you have set the amount to invest in the stock market, it is better to decide on the number of shares that will be suitable to buy. Some simple tips are mentioned below. 

  • Look for price of current share by evaluating a stock quote.
  • Divide the amount you wish to invest by current share price of stock
  • If broker allows buying fractional shares, you can easily decide on the number of shares to buy. However, if you cannot buy fractional shares, you can round the calculation to nearest whole number for convenience of calculation.    

How cost help in determining the right stock to buy?

In case of beginner stocks, cost helps in knowing the number of shares that will be suitable to buy. Though, the commission one has to pay for the online broker usually remains fixed. Therefore, if you buy more number of shares, you have to pay small commission amount in ration to the percentage of your investment. So, if you have to pay less commission, you can buy more shares of stock. 

However, the commission you pay to the broker may be different if you wish to buy the stock from online brokers. So, when thinking about how to invest in stocks online, the cost shall help determine the number of stocks to buy. 

Getting the right stock price

When looking for the best shares to buy for beginners, it is necessary to consider the price of the stock that you wish to get. Different stocks have different price it is an easy way of finding how much you wish to invest in buying the stocks. Therefore, there is no such strict number of stocks that you have to buy as a beginner. 

Savings to consider 

When wondering how to buy stocks for beginners, consider some vital savings before you buy stocks. If you have enough savings, it shall help you buy more number of stocks in the share market. Make sure that you invest in the right stock that yields a suitable return.

Things to consider when ready to invest in stocks 

If you are ready to invest in individual stocks, the following shall help you.

  • Try to pay off credit cards in time – Never opt for buying shares when you are credit card EMIs to pay off. Only after repaying high-interest debts, you should think about investing in the stock market.
  • Arrange for emergency funds – After you have bought first shares, some funds can help in times of emergency. Even by this, you do not have to pay using your credit card.
  • Get ready to leave money for 5-10 years – individual stock investing in a long term affair. Here, you are investing the money for a minimum of 5 years. 
  • Try to have enough money you can afford to lose –As there is chance of individual company stocks to go bankrupt, there is also the possibility that you may lose what you have invested.  

Therefore, beginners can go through ashok leyland share price as it may be a good investment. Knowing about the share prices of the stock market properly before investing in it shall help get better returns and avoid problems of investment loss in the initial stages. 

In case the investor wants to invest in single stock, they can take the risk only after conducting research. In this regard, they can look for tata motors share that often promises to give better returns on the investment. If the company does well in the share market, it assures a good return on the investment. But beginners should check the condition of the share market of the company before finalizing it.

What is the benefit of buying less than one share of stock?

Brokers are also allowing the customers to buy fractions of stocks instead of buying single or more shares of stock. In regard to the concept of dividend reinvestment, the brokers are allowing the customers to invest in share fractions for some time. However, this new concept offers some benefits that are mentioned below.

  • If the investors do not have enough money to invest in buying shares of stock, they can opt for buying fractions of share in the market. This is possible if only your broker allows investing for the share fractions. 
  • Secondly, investors can buy more than one share is putting the money to work. Therefore, before doing so, it is important to check whether they can get suitable returns from the share investment or not.

Other considerations determining number of shares to buy 

Apart from the above said one, there are two other considerations that can help the beginners decide the number of shares to buy.

  • 100-share lots – In share market, 100-share is called ‘round lot.’ There are plenty of dealings of round lot that takes place in the market. The price of the share depends on per 100 shares. To earn good money from share market, it is better to buy multiples in 100. 
  • Diversification –Even if you are able to afford some shares, there is no point in investing all your money for the share. Here, trading commissions are important to consider. Therefore, it is better either to get large position in one stock or opt for a smaller position. 

Therefore, only after going through suitable considerations, one should buy shares from the stock market. Even if they opt for shares of renowned companies as mentioned above, they must research well about the condition of stock market that shall help decide the number of shares to buy.