Here’s a new investment strategy that incorporates less risk and allows you to limp into your respective stock positions.
Quick Background
When I buy round lots (100 shares per purchase), sometimes I would get burned by wild swings in the market, especially during key sector selloffs. If you’re terrible at controlling your emotions (like myself at times), then buying large stock positions at once is hazardous to your heath, literally.
The Strategy
A lower risk strategy is to buy 25 shares of stock at a time, then 25 shares then 25 shares and so on.
Why It Works
This strategy works well for several reasons:
- Reduces the amount of risk up front and lets you benefit from dips in stock prices, creating buying opportunities.
- Turns your trading commissions into “insurance premiums” so you can wait on the sidelines until you buy again
- Costs a lot less to open position in rather pricey stocks.
- Allows risk-adverse investors to invest for less.
Final Thoughts
I’m sure there are many more advantages, but those are the big ones. Whether you’re a seasoned investor or a newbie, starting with less shares gives you more control over your future moves, protects more cash from losses, and may be that key ingredient to your blossoming investment strategy.
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