OT: Buying Stock

[Christopher Browne]

On Feb 16, 2008 2:54 PM, Mr Chris Aitken <chris-n/jUll39koHNgV/OU4+dkA at public.gmane.org> wrote:
> Stephen wrote:

> > Do you have a bank account?
>
> Yes.

Then your bank is a pretty good place to go.  More convenient,
generally, than other options.

> > Whoever you bank with is a good starting place since they have some
> > record that you exist.
>
> Buy stocks straight fromt he bank?

Maybe...

> > The market is down, and you are, I assume, young, so buying stocks
> > makes sense.
>
> I'm 48.

A bit late, but better late than never...

> > How much is in your RRSP?
>
> I dunno - seven, eight grand?
>
> > Buying individual stocks when you have less that $20,000 (bare
> > minimum) is not wise.
>
> Why?

Basically because the minimum transaction size where commissions
*don't* "eat your lunch" is at about the $1500-$2000 range.

The minimum per-transaction commission is usually around $40, and you
can't get a diverse portfolio without buying at least 10 different
securities.

That being the case, "diversity" means that you'll be spending at
least $400 in commissions.  $400 on $20K isn't too material.  On a
smaller portfolio, you'll be spending most of your value on
commissions; you won't get a chance to earn anything on it!

> > If less than 20,000 consider a stock market index mutual fund from
> > your bank.
>
> Why?

It gives you diversity (lowers risk) without you having to do 10 transactions.
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