Reading more, beyond the bottom line... If the stock shoots way up in price after your initial buy, then accept that you missed that run. If it goes down, however, you have the opportunity to buy more, and lower your cost basis.
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Buying all at once:
40 shares of GOOG purchased
Total Investment: $22,000
Total online trading cost: $9.95
You've reached your desired position in GOOG.
NOT buying all at once (staggering your buys):
Set your strategy: You decide that you'll try to stagger your buys over four purchases, and hope to complete your position within the next 10 trading days.
1st Buy: 10 Shares: You buy 10 shares at $550. per share
10 Shares: Cost:
Total Investment: $5,500
2nd Buy: 10 Shares: Three days later, you buy the next 10 shares, after it has gone down to $525. per share
Total Investment: $5,250
3rd Buy: 10 Shares: Exactly a week after your initial purchase, you buy 10 more shares, after it has gone down again to just $498. per share
Total Investment: $4,980
4th Buy: 10 Shares: YTwo days later, the price starts to rebound, and you decide to buy the last 10 shares of your position, at $508. per share
Total Investment: $5,080
Total Investment Cost:
40 Shares: Cost: $20,860
Total online trading cost:
$9.95 x 4 = $39.80
Total Amount: $20,900
A Big Difference: $1,100 is not small change. That's a significant amount that you could put to good use investing elsewhere.
But what if it goes up and I miss that profit?: Then you missed it. It's better to be cautious than reckless. Accept that you missed it, and move on to the next stock for which you've done homework and have decided to buy, or watch this stock, to come back to it to possibly reach your desired position, if it pulls back in price.
Scenario #1: Sense of Urgency: Let's say you believe that a known new product launch is going to boost the stock, but it hasn't propelled the stock higher yet. You've decided to buy, but you don't want to stagger your purchases for too long, given the upcoming product launch.
Buy 50% today, and 50% over the next few days, waiting for a general market pullback, which might also bring down your stock.
Scenario #2: Expected Earnings Report- Neutral to Positive:
Buy 50% before the Earnings Results are officially announced, and
Buy the last 50% of your position, after earnings are announced.
Don't forget, just because everyone is "sure" a stock is going to beat earnings doesn't mean that companies don't disappoint, and miss earnings. It happens. This is just a way to be conservative, going into that unknown area. If the stock goes up dramatically on great earnings, then you have to again accept that you missed it, and move on.
Scenario #3: Expected Earnings Report- Likely to be Negative:
Do not buy yet. Wait until after the earnings results are announced.
If their earnings miss by a lot, you may reevaluate whether you wish to buy. If you determine you still want to build your stock position, then you may want to buy on the day of the bad news, to take advantage of a possible overreaction that causes the price to go down, well below where it is justified.
After that first purchase, continue to build your position over 2-3 more purchases.
These are just example scenarios and guideline suggestions!... Again, we have to stress that you should not base your investment decisions based on this website, or the examples or suggestions that we provide. Please consult a financial expert before making investment choices.
Diversification is key!... One of the most important things you can control is how diversified your portfolio is, and that you keep it that way, covered in the next step, Diversification...
More about this in Step 430...
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