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I have about 62 shares of Home Depot stock that my grandparents slowly bought for me over the years (thanks grandparents!), and I want to start building up a more diverse portfolio. Specifically, I want to start investing in quality companies that have a long track record of paying dividends.

I have an online brokerage account with TradeKing, and they charge $4.95 per stock trade. My dad was suggesting that I save up at least $500 before making a trade so that I'd only be losing 1%. I realize that it'd be $5 to sell it as well, but I plan on doing that as infrequently as possible, as I'm looking to be a long-term investor. I considered maybe waiting to save up $1000 for a trade, but I'm already putting money into a 401k as well (about $100 every paycheck), so it might take longer than I want.

I know that you guys can only make suggestions, but I was wondering if there were any general rules that people followed. I couldn't really find anything in my own research. Thanks in advance for your advice!

  • Out of curiosity how old are you? – Pete B. Nov 10 '16 at 13:43
  • 62 shares of home depot are worth around $8000. Why not sell those and just get an ETF? – SMeznaric Nov 10 '16 at 16:27
  • I am 25 Pete B. – Jackmerius Tacktheritrix Nov 10 '16 at 18:23
  • Good catch on the $5 on the sell side. The commission for each trade gets added to your cost basis. You aren't actually losing the $5 it just gets passed into the cost of the stock. That is a better way at looking at it. But yes, the more you purchase at once - the more you can distribute the cost over each share of stock. – Ross Nov 10 '16 at 20:59
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I'd answer it this way: What do you want to do?

I'd say any amount is acceptable from as low as $100. When you look at the specific "tree" of investing paying $5 for a $100 seems unacceptable. However when observing the "forest" what does it matter if you "waste" $5 on a commission? Your friends (and maybe you) probably waste more than $5 multiple times per day. For them buying a latte might empower them, if buying another share of HD, for a similar cost, empowers you than do it. In the end who will be better off?

Studies show that the more important part of building a significant investment portfolio is actually doing it. Rate of return and the cost of investing pales in comparison to actually doing it. How many of your peers are doing similar things? You are probably in very rare company.

If it makes you happy, it is a wonderful way to spend your money.

  • Care to cite/link some of those studies? – Mindwin Nov 10 '16 at 14:24
  • This is very true...The idea is for that $100/$500/$1000 to grow over 30-40 years anyway, so that $5 will be much less significant in the long run. Thanks for the advice! – Jackmerius Tacktheritrix Nov 10 '16 at 18:31
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    This answer is based on the assumption that the OP would not follow through with investing $500 at a time, so $100 is better than nothing. Assuming he would follow through, . five $100 trades vs one $500 trade is a waste of $20, or 4%. So looking long term at the forest in many years, he won't be down $20, he'll be down 4% which is (hopefully) significantly more. – VBCPP Nov 11 '16 at 18:36

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