There are a few factors to consider when deciding how many shares of a particular stock to buy. In addition to your available capital, you should consider diversification and purchasing fractional shares of stock.
With that in mind, here's a quick guide that can help you determine the ideal number of shares to buy.
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How many shares can you buy based on price?
How many shares can you buy based on price?
First, let's look at how many shares you can buy. Assuming your broker doesn't charge commissions for stock trades (online brokers typically don't), calculating the number of shares you can buy with a certain amount of money is easy.
To help you determine how many shares of a particular stock you can buy, here's a three-step process to use:
Find the current share price of the stock you want
You can obtain the share price through your broker or from a financial website. Make sure you're looking at a real-time quote, not a delayed one. Some public news sites offer quotes delayed by 20 minutes or so.
Divide the amount of money you have available to invest in the stock by its current share price.
For example, if you have $1,000 to invest and a stock is trading for $40, this equals 25 shares. Of course, in the real world, you will probably not get a whole number, and that's why the next step is needed.
Determine the number of shares you can buy
If your broker allows you to buy fractional shares, or you got a whole number in the second step, the result is the number of shares you can buy. If you can't buy fractional shares, round down to the nearest whole number.
Example
As an example, let's say you want to buy Apple (AAPL 0.45%) stock, and you have $2,000 to invest. According to a real-time stock quote, Apple is trading for $183.20 per share as I'm writing this. Dividing those two numbers would give you about 10.92 shares. If your broker supports fractional shares, this means you can afford to buy 10.92 shares of Apple. If your broker doesn't support fractional shares, you would be able to buy 10 shares.
What about diversification?
What about diversification?
Here's an important point, especially for newer investors. Just because you can buy a certain number of shares of a particular stock doesn't mean you should. For example, if you put $1,000 into a newly opened brokerage account and a stock you want to own trades for $50, you have the ability to buy as many as 20 shares.
However, don't forget about portfolio diversification. Instead of a large position in one stock, a better investment strategy is spreading your initial brokerage deposit across a few different companies.
Most experts tell beginners that if you're going to invest in individual stocks, you should ultimately try to have at least 10 to 15 different stocks in your portfolio to properly diversify your holdings. Since most brokers no longer charge commissions for online stock trades and many allow you to buy fractional shares, it's more practical than ever to spread a relatively small amount of capital across many different stock positions.
Is it worth buying one share of stock?
Is it worth buying one share of stock?
Absolutely. In fact, with the emergence of commission-free stock trading, it's quite feasible to buy a single share. Several times in recent months, I've bought a single share of stock to add to a position simply because I had a small amount of cash in my brokerage account.
However, if your broker is one of the few who still charges commissions, it might not be practical to make small investments. If you are still paying commissions, consider making the switch to a top-rated online broker who doesn't charge commissions on online stock trades. Let's be perfectly clear: With so many great commission-free options, there is no reason to pay commissions on online stock trades.
Definition Icon
Buy-and-Hold Strategy
A strategy that entails buying stocks or other securities and not selling them for long periods of time, sometimes decades.
Is it possible to buy less than one share of stock?
Is it possible to buy less than one share of stock?
In recent years, brokers have started to embrace the idea of allowing investors to buy fractional shares directly.
There are two big benefits of fractional share investing. First, it gives newer investors access to stocks with a high share price. As one example, if Chipotle Mexican Grill (NASDAQ :CMG) is trading for $2,000 per share, an investor with only $500 to invest could buy 0.25 shares of the stock. If the broker didn't allow fractional share investing, they couldn't buy any.
Second, fractional share investing allows investors to put all of their money to work. Using our Chipotle example, if you had $3,000 to invest and didn't have the ability to buy fractional shares, you would be able to purchase just one share and have $1,000 left over. With fractional shares, you could invest your entire $3,000 and purchase 1.5 shares of the fast-casual dining giant.
How to Research StocksGood research can help investors find the best companies to invest in.
How Much Money Do You Need to Start Investing?So how much money do you really need to get started investing?
Investing in Growth StocksMake money by identifying growth stocks: companies poised to grow faster than the market or average business in its industry. How many shares of stock should you buy?
The bottom line is that there is no universal answer to this question -- it depends on your personal situation. Just remember to consider these important factors:
- How much money you have to invest.
- Whether you need to diversify your investment portfolio or want to put all your available capital into the stock.
- Whether your broker allows fractional share investing.
Matthew Frankel, CFP® has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool has a disclosure policy.
FAQs
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How many shares of 1 stock should you buy? ›
What is a good number of shares to buy? The number of shares you should buy depends on the price of the stock and how much money you are willing to invest. For example, if a stock is worth $10 and you have a $10,000 portfolio, a good number of shares would be between 20 to 100 depending on your risk tolerance.
How many shares should a beginner buy? ›
Most experts tell beginners that if you're going to invest in individual stocks, you should ultimately try to have at least 10 to 15 different stocks in your portfolio to properly diversify your holdings.
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Imagine you wish to amass $3000 monthly from your investments, amounting to $36,000 annually. If you park your funds in a savings account offering a 2% annual interest rate, you'd need to inject roughly $1.8 million into the account.
What is the best amount of shares to buy? ›
Deciding How Many Shares to Buy
There is no minimum amount of shares you must purchase when buying stocks, however, considering broker commissions and fees, most people are best off buying a minimum of $500-1000 worth of shares when investing.
How much do I need to invest to make $1000 a month? ›
Treasury bills (T-bills) are short-term debt instruments that are paying out around 4.75% APY, giving you a guaranteed rate of return that is backed by the U.S. government. To make $1,000 per month on T-bills, you would need to invest $240,000 at a 5% rate.
How to determine how many shares to buy? ›
Focus instead on the dollar value you want to have invested in a given company. For example, if you want to buy $3,000 worth of Apple stock, divide that by its recent price of around $264 per share. You'll arrive at 11.4, so you'd buy 11 or 12 shares.
What is a good number of shares to start with? ›
Issuing shares in quantities of 10 is a popular option, with many companies choosing to issue 100 shares, or even 1000. These quantities are preferred because they are easily divisible, which simplifies the task of allocating or working out a shareholder's ownership percentage.
Most studies use the fully diversified portfolio as a benchmark and then derive that a portfolio of 20-30 stocks achieves a 'similar' risk profile as the target portfolio.
What is the best share to buy for beginners? ›
Some major best stocks for beginners are mentioned below.
- Vikas Ecotech Ltd. ...
- Indian Overseas Bank. ...
- Comfort Intech Ltd. ...
- Seacoast Shipping Services Ltd. ...
- Virgo Global Ltd. ...
- Indian Infotech & Software Ltd. ...
- Swiss Military Consumer Goods Limited. ...
- Dish TV India.
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Is 35 stocks too many for a portfolio? ›
Private investors with limited time may not want to have this many, but 25-35 stocks is a popular level for many successful investors (for example, Terry Smith) who run what are generally regarded as relatively high concentration portfolios. This bent towards a 30-odd stock portfolio has many proponents.
What is the ideal number of stocks in a portfolio? ›
What's the right number of companies to invest in, even if portfolio size doesn't matter? “Studies show there's statistical significance to the rule of thumb for 20 to 30 stocks to achieve meaningful diversification,” says Aleksandr Spencer, CFA® and chief investment officer at Bogart Wealth.
Is 40 stocks too many? ›
Some investors do quite well for themselves by owning the same 15 stocks for decades. For others, owning 50 or 60 different stocks achieves similar results. And so technically, there's no hard and fast rule when it comes to the number of stocks you invest in.
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