Does it make any sense to have individual stocks, bonds, preferred shares

Question

I have a self-directed trading / investment account that has only ETFs in it. Each trade is $10. Does it make any sense to have individual stocks, bonds, preferred shares and if yes, what is the minimum portfolio balance to avoid paying too much for transaction fees?

Answer 1

Sure, with some general rules of thumb:

• Don't put any more that 10% of your entire portfolio (or whatever amount you're willing to lose completely) in any single stock, bond, or preferred share
• Don't buy stock in a company unless you have solid, fundamental reasons for buying it.
• Have a strategy - are you investing in a particular company or a sector? How do you determine if one stock is a better buy than another?
• Have an exit plan - how much are you willing to lose before getting out?
• Don't use "dollar-cost averaging" as an excuse to throw good money after bad - only buy more of a stock that's fallen if you have good evidence that it will rebound.

what is the minimum portfolio balance to avoid paying too much for transaction fees?

Well, the fee doesn't change with portfolio balance or order size, so I don't know what you're trying to do here. The way to have less transaction fees is to have less transactions. That means no day-trading, no option rolling, etc. A Buy-and-hold strategy (with free dividend reinvestment if available) will minimize transaction fees.