No offense, Tony, really, but you just gave Rand some pretty bad advice. Imagine if a year ago, Rand had decided to split his $20k into 10 stocks, $2k each. I don't want to do all of the math, so for now, say four of those stocks were MSFT, CSCO, GPS, and PFE. A year ago, these stocks were selling at 65, 37, 23, and 75 respectively. So, for his $8k Rand would have bought 30, 54, 87, and 27 of each of these stocks, respectively. What would he have to show for his odd lot purchases, you ask? Well, today his 30 shares of MSFT at 140 would be worth $4,200, 54 shares of CSCO at $95 would be worth $5,130, 87 shares of GPS at $57 would be worth $4,959, and 27 shares of PFE at $125 would be worth $3,375, for a grand total of $17,664. That's right, his odd lot purchases would have more than doubled. Shoot, just look at PFE for the lesson to be learned - his 27 meager shares would have increased in value by 68%.
Odd lot purchases are nothing to be ashamed of. It's a myth of investing. Similarly, don't shy away from "expensive" stocks (i.e., stocks with share prices over $50). The only thing that counts is percentage gain/loss.
My advice - pick 10-14 stocks. At a $10 commission for each purchase, your expenses of $100-$140 will be less than 1% of your total invested amount, which is better than most mutual funds. For at least 25% of this amount, stick with big, solid Dow 30 companies. Shoot, try the Beating the Dow approach. |
