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 4.33%) 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?
Best Growth Stocks for April 2024Make 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
Let's say that you start with the time frame in mind, hoping an investment will double in value over the next 10 years. Applying the Rule of 72, you simply divide 72 by 10. This says the investment will need to go up 7.2% annually to double in 10 years. You could also start with your expected rate of return in mind.
What are the 10 stocks the Motley Fool recommends? ›
The Motley Fool has positions in and recommends Alphabet, Amazon, Chewy, Fiverr International, Fortinet, Nvidia, PayPal, Salesforce, and Uber Technologies.
How many shares of stock should you buy at a time? ›
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.
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 80% rule investing? ›
In investing, the 80-20 rule generally holds that 20% of the holdings in a portfolio are responsible for 80% of the portfolio's growth. On the flip side, 20% of a portfolio's holdings could be responsible for 80% of its losses.
What is the rule of 69 in investing? ›
It's used to calculate the doubling time or growth rate of investment or business metrics. This helps accountants to predict how long it will take for a value to double. The rule of 69 is simple: divide 69 by the growth rate percentage. It will then tell you how many periods it'll take for the value to double.
How many shares of a stock should I buy? ›
No minimum – but don't forget about fees
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.
What stock will make me rich in 2024? ›
For this purpose, we created a list of stocks that could make you rich in 2024, and some of them include Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOGL), and Advanced Micro Devices, Inc. (NASDAQ:AMD). A financial analyst looking through a microscope at stocks to determine their market value.
How many shares of stock to make $1,000 a month? ›
To have a perfect portfolio to generate $1000/month in dividends, one should have at least 30 stocks in at least 10 different sectors. No stock should not be more than 3.33% of your portfolio. If each stock generates around $400 in dividend income per year, 30 of each will generate $12,000 a year or $1000/month.
How much money do I need to invest to make $1000 a month? ›
A stock portfolio focused on dividends can generate $1,000 per month or more in perpetual passive income, Mircea Iosif wrote on Medium. “For example, at a 4% dividend yield, you would need a portfolio worth $300,000.
It's a good idea to own a few dozen stocks to maintain a diversified portfolio. If you load up on too many stocks, you might struggle to keep tabs on all of them. Buying ETFs can be a good way to diversify without adding too much work for yourself.
How many stocks should I own with $100k? ›
One rule of thumb is to own between 20 to 30 stocks, but this number can change depending on how diverse you want your portfolio to be, and how much time you have to manage your investments. It may be easier to manage fewer stocks, but having more stocks can diversify and potentially protect your portfolio from risk.
How much money do I need to invest to make $3,000 a month? ›
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 ideal number of shares in a portfolio? ›
Assuming you do go down the road of picking individual stocks, you'll also want to make sure you hold enough of them so as not to concentrate too much of your wealth in any one company or industry. Usually this means holding somewhere between 20 and 30 stocks unless your portfolio is very small.
What is the Rule of 72 in simple terms? ›
What Is the Rule of 72? The Rule of 72 is a simple way to determine how long an investment will take to double given a fixed annual rate of interest. Dividing 72 by the annual rate of return gives investors a rough estimate of how many years it will take for the initial investment to duplicate itself.
What is the Rule of 72 simplified? ›
The Rule of 72 is a calculation that estimates the number of years it takes to double your money at a specified rate of return. If, for example, your account earns 4 percent, divide 72 by 4 to get the number of years it will take for your money to double. In this case, 18 years.
What does the Rule of 72 tell you? ›
Do you know the Rule of 72? It's an easy way to calculate just how long it's going to take for your money to double. Just take the number 72 and divide it by the interest rate you hope to earn. That number gives you the approximate number of years it will take for your investment to double.
Does the Rule of 72 really work? ›
The Rule of 72 formula provides a reasonably accurate, but approximate, timeline—reflecting the fact that it's a simplification of a more complex logarithmic equation. To get the exact doubling time, you'd need to do the entire calculation.
