0

I deposit $100 into an online stock account every paycheck. Should I buy stock as soon as the deposit is made or wait until I have a larger amount of cash and buy more at one time?

  • This depends on what types of fees are charged. – StrongBad Feb 28 at 20:47
5

It really depends on the fee structure of your broker. Your best bet would be to trickle the money in to a zero commission low cost mutual fund or ETF.

Personally I would steer clear of "free" brokers like Robinhood or Acorns and just go to one of the big organizations like Schwab or Fidelity. Both have a huge array of funds available at no commission.

For a host of other reasons it's really not advisable for individuals to buy specific company stock. You can put your $100 in to a mutual fund like SWTSX to get exposure to a broad range of companies for no commission and about 0.04% annual expense charged by the fund for administration.

An ETF is a lot like a mutual fund but the units of the fund are traded on the open market. The issue with ETFs when you have small amounts of regular contributions is that you typically can't buy fractional shares/units. SPY and VOO, both are large S&P 500 tracking ETFs, have a current unit costs of more than $250, so you couldn't buy any with $100. With a mutual fund you invest in dollar amounts.

Before exposing any money to the stock market you should make sure you have some sort of stable savings first. Once you have an established foundation start applying risk to your money. Don't be lured in by the "11% average annual returns" of the stock market.

  • 2
    "I would steer clear of "free" brokers like Robinhood or Acorns" -> Why? E.g. do you think that their trade execution quality is lower than non-free brokers? (just curious) – Franck Dernoncourt Mar 1 at 0:16
  • From the feedback that I have read, Robinhood has multiple negative issues (too many to list in a comment) as well as lacking in multiple areas. Because of their no commission structure, it's a good place for a beginner with a small account. If you need more than their stripped down platform, you need to look elsewhere. – Bob Baerker Mar 1 at 11:50

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.