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How investing less can cost you more

by , 24 April 2014

Often readers ask me how much they should invest into a share.

Put too much money into one share and you could lose everything. Too little and you won't get anywhere when it comes to profits.

So today I'll show you exactly why investing too little is a more common, and more costly mistake than investing too much.

Why you MUST invest a minimum of R5,000 
 
Every investor needs to decide how much of their capital they can put down. 
 
In a perfect world – one without transaction fees – you could invest with R1,000, R500 or even R100. Unfortunately, you can’t invest your money in a zero-fee paradise.
 
Each time you buy a share, you’re hit with a range of transaction fees. Then, when you sell out of your position, you’re faced with a second barrage of charges.
 
I’ll explain using an example why it’s better to invest with R5,000 or more on every single share you buy. 
 
Let’s say after reading the Stock of the Month you like a company and ask your broker to buy R5,000 worth of shares. Your broker then comes back to you with a total cost fee of R5,121.86 – That’s R5,000 for the shares and another R121.86 for all the costs.
 
See the table below to see the fees I’m talking about:



Once you take into account all the brokerage fees and other transaction costs you’ll pay just over 2.4% on your R5,000 investment. But wait - You’ll get hit with another round of fees when you sell!
 
Let’s say your share surges 30% over the next few months and you bank your gains. You phone your broker to take profit and he credits your account with R6,378.14 (R6,500 – R121.86). So in total, you paid R243.72 for the entire transaction and left with a net profit of R1,256.28 – or 25.6%.
 
If you’d only invested R1,000, the result would be totally different! Let’s take a quick look what happens if you invested with this amount.
 
When you buy, the transaction costs would total R111.85 – a massive 11.18% of your initial R1,000. If the shares increase in value by 30% and sell them as in the other example, you’ll incur another R111.85 in fees. Your total fee is R223.70 – eating through 22.37% of your invested capital! 
 
Sure you made R300 on your R1,000 investment, but you gave back R223.70 in fees!

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In the new report The Best Unit Trusts to Invest in Today Starting From Just R500 you’ll find the answers to all these, and more, of the most important Unit Trust investing questions, so you can start successfully investing in 'ETF Killer' Unit Trusts for yourself from as little as R500.
 
Click here to find out more
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So here’s what you can do about it
 
If you want to invest your money but have less than R5,000 – simply wait. Keep saving until you meet the R5,000 and then invest in the share.
I know patience doesn’t come to everyone so easily, but there’s something else you can do to get into the markets.
 
Invest in the ‘ETF Killer’. 
 
Simply put, it’s a low-cost unit trust that offers a whole lot more than a regular ETF. All you need to get started is R500. Click here for more details.
 
Thrive in your possibilities,
 
Jonathan Bachrach
 



How investing less can cost you more
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