I Started Investing in Individual Companies. Part 2

I Started Investing in Individual Companies. Part 2

One of the constants that should be noticeable in much of what I share is the avoidance of fees and other unnecessary expenses whenever possible and this would apply to commissions.  Since I am still trying to grow money by investing in individual companies, I find it necessary to minimize expenses or fees and this is why I covered my attraction to commission-free brokers in part 1

One of my favorite brokers for commission-free trading is Robinhood (There are no personal rewards or benefits to me for mentioning this broker). This company’s services have been available since 2014-15 and has been getting noticed by the competition because of the option to avoid commissions.  From my experience, you have to be content with communicating with this firm via email or support forum and I find their response time to be satisfactory.  However, this is not an issue for me since I hardly ever contact brokers.  I am not any more concerned about the safety of my money than with any other broker because it is also protected by the SIPC

Please note that I almost never place market orders with any broker but instead use limit orders (See the difference here), by which I determine the price I want to pay and enter that order.  This way I am filled on my terms as opposed to what the broker may claim is the best price available.

As an example of commission-free investing, if I choose to buy 1 share of a company that is trading at a buy price of $30, it would only cost me a total $30.  If I were paying $10 in commissions, it means that each time I bought 1 share of that $30 stock, it would cost me $40 ($30 for the stock +$10 for commission).  If I did that 10 times for the same stock at $30, my cost would be $400 for the 10 shares because I would have now paid $100 in commissions, as opposed to a cost of $300 with a commission-free broker. So, the commission-free broker would allow me to keep that extra $100 in my pocket.  

In that same example where I have to pay the broker $10 each trade, it means that if I bought 1 share and the stock moved from $30 to $40 per share, I would still be flat on the investment, because owing to the $10 I paid in commission, my cost is $40.   Additionally, since I would have to pay commission when I sold, if the stock went to $50, I would still be flat if I chose to sell at that price. To overcome that, I would have to put more planning into my purchases to pay less commissions, but I find it is more efficient to avoid having to include the impact of commissions as part of my preparation.

Investing is risky and doing so in individual companies will likely carry the most risk across your finances, but if you are diligent and fortunate, you may find that the value of the money you invest surpasses your other savings.  Good luck!

Note: Anyone interested in opening a Robinhood account for the first time should check with family and friends to see if they already have an account.  If you are that fortunate, their referral would earn both parties a free share of some random company.  The free share reward ‘may’ be a low-priced stock with little value, but it is still money that one can cash out after some time if he doesn’t like the company.  For the first time investor, it would an opportunity to own and monitor his first stock for free. 

Carlisle

Welcome to My Savings and Me. I have been blessed just enough to have a financially stable life for my family and myself. I have used simple saving and investing methods to make my money work for me and it is now my hope that information shared throughout this blog may ignite a fire in others.

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