02-11-2006, 02:57 AM
-jeffB Wrote:
>
> This advice is particularly common from online
> brokers, who earn four times the commision if you
> make four purchases of 25 shares instead of one
> purchase of 100. Assuming $10 a trade, that means
> you're paying an extra 40 cents for each share you
> buy, rather than an extra dime each.
>
> (That's not to say that staged buying is a bad
> strategy in general, but when you're doing
> frequent trading on small quantities of shares,
> you need to be careful not to let transaction
> expenses eat up your profits.)
>
I was going to go on along that line, but I thought that was just intiutively obvious to the casual observer. You would of course wait for a significant drop in price. Now if you bought 25 shares of AAPL at $71.60, then waited a couple days, you would have more than made up the commision on both trades when you bought more at $67. Then you waited a day or two more, you could pick some more up for $65. Now tell me if you think you wasted money on extra commisions?
>
> This advice is particularly common from online
> brokers, who earn four times the commision if you
> make four purchases of 25 shares instead of one
> purchase of 100. Assuming $10 a trade, that means
> you're paying an extra 40 cents for each share you
> buy, rather than an extra dime each.
>
> (That's not to say that staged buying is a bad
> strategy in general, but when you're doing
> frequent trading on small quantities of shares,
> you need to be careful not to let transaction
> expenses eat up your profits.)
>
I was going to go on along that line, but I thought that was just intiutively obvious to the casual observer. You would of course wait for a significant drop in price. Now if you bought 25 shares of AAPL at $71.60, then waited a couple days, you would have more than made up the commision on both trades when you bought more at $67. Then you waited a day or two more, you could pick some more up for $65. Now tell me if you think you wasted money on extra commisions?