Preferred approach for buying shares

M

Midtown

Registered User
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Interested in the forum thoughts.
Let’s say you’ve identified a basket of 5 shares and plan to buy €5k worth per month. Would you buy €5k x 1 stock per month or buy €1k x 5 stocks per month?
 
Assuming that this is a buy and hold (long term) investment then just buy them when you have the money.
Don't try to time the market or engage in euro cost averaging as it's pointless in the greater scheme of things.
 
Just a taught but €5k x 1 could potentially attract fewer transaction fees when the fee contains a fixed element or if there are minimum/maximum transaction fees at play.
 
It is much simpler to just buy €5k of one share.
The transaction fees would be lower.
And when you are later calculating your capital gains or losses, it will be a lot easier.

There is a tiny loss of diversification but not enough to worry about.

Brendan
 
Agreed, 5k into 1for the reasons above. But it also allows you to benefit if one of your shares is on sale.
i.e. This month one of your shares drops by 10%, buy that one.
 
Thanks, yes it’s to buy and hold. For minimising transaction fees my own preference is to buy one per month.
 
I have an account with Davy. I was purchasing a lot of a UK builder share. Lots of 20,000. I was purchasing 100,000.

I chose a day when the market was in negative territory. Bought my first lot at £1.13. Then waited and bought my second lot at £1.12. Then waited and bought my third lot at £1.11.

I spoke with a dealer in Davy and he suggested that I could have bought the 100,000 in one lot. The market maker would have done a deal on the larger purchase and most likely would have achieved an average price.

When I went to sell I ended up selling them in the same lots as I purchased them so I could keep accurate records.

I now usually make one large purchase but put my offer price in way below the offered price. I often watch the live trades and you can see the price being chased down to the price I have offered. As soon as it touches my price it turns around and starts moving back up again.
 
ClubMan said:
Sounds like trying to time the market to me.
Why not 5%, or 20%?
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It's not timing the market. Each month you put in 5K, into 1 of 5 stocks, no matter what. i.e. no market timing.
However, it allows you to take advantage, if 1 of the 5 stock is on sale (10% was just an example, any significant drop will do).
All your doing is changing the order in which you buy.
 
Shares being "on sale" is nonsense, the price is the price.

A 10% drop doesn't mean it costs 10% less than its true value.
 
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Silversurfer said:
Have you given thought to the type of shares you are buying?
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I have the industry/sector split and have some companies in mind. Mostly big names. Nothing overly complicated.
the biggest complication I see is which exchange to buy on.
 
Corola said:
Shares being "on sale" is nonsense, the price is the price.

A 10% drop doesn't mean it costs 10% less than its true value.
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The initial order you pick to buy the share, is random. Changing the order as I suggest doesn't change that, it's still random.
If you are correct and the price is the price and it is always correct (all investors are of course perfectly informed rational beings) then doing what I suggest, makes absolutely no difference.
However, if I'm correct and you can occasionally find than 1 of your 5 stocks is trading at a lower price than expected, then you are better off.

Heads I win. Tails you Lose!
 
But there's no way of knowing which of the 5 stocks is trading at a lower price than expected, by measuring an arbitrary % drop over a period of time.

To be better off, you're saying that because the price dropped more in the last period it will rise more than the other stocks in the next period. Replace "drop" and "rise" with Heads and Tails and you've got the Gambler's Fallacy.
 
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