Brendan Burgess
Founder
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I have always thought that you need about €20 000 to invest directly in the stockmarket. Having researched the dealing charges of the stockbrokers, I am now revising my opinion.
Campbell O'Connor charges 1.5% commission subject to a minimum charge of €25.40 per deal. That means that if you buy €1000 worth of shares in a company, the initial charge will be 3.5% in total (2.5% commission and 1% stamp duty ).
You need shares in 10 different companies to have an adequately diversified portfolio, so €10 000 is the minimum needed to achieve this.
But while a diversified portfolio is desirable, it is not essential. If you have only €1 000 to invest and it wouldn't be a disaster if you lose it , there is nothing to stop you investing in just one share. This is particularly so if you are expecting to have more money to invest in a few months time. You will in time build up an adequately diverse portfolio of shares.
This strategy only applies to people who are investing for at least the medium to long term. If you buy today and sell in 5 years time, there will be a 3.5% initial charge and a 2% selling charge which gives an acceptable average charge of 1% a year. If you intend to sell in a year's time, the total charge of 5.5% would be too high a charge to expect to cover with one year's stockmarket returns.
Let's say that you have €10 000 sitting in a deposit account. Why not leave €9 000 in the deposit account and test the stockmarket with a €1 000 investment in a share of your choice ? Even if the very worst happens and you lose the entire investment, it won't be a disaster. This small taste of the stockmarket will help you learn a lot about owning shares.
It is important to remember that a total loss in value in a blue chip share is extremely rare. A 50% drop in value would be very unlucky. And of course, a 50% rise is more likely than a 50% drop.
So, in summary, if someone asks how much do they need to invest in the stockmarket I will answer that the minimum is
€1 000 as long as they appreciate the risk involved.
Campbell O'Connor charges 1.5% commission subject to a minimum charge of €25.40 per deal. That means that if you buy €1000 worth of shares in a company, the initial charge will be 3.5% in total (2.5% commission and 1% stamp duty ).
You need shares in 10 different companies to have an adequately diversified portfolio, so €10 000 is the minimum needed to achieve this.
But while a diversified portfolio is desirable, it is not essential. If you have only €1 000 to invest and it wouldn't be a disaster if you lose it , there is nothing to stop you investing in just one share. This is particularly so if you are expecting to have more money to invest in a few months time. You will in time build up an adequately diverse portfolio of shares.
This strategy only applies to people who are investing for at least the medium to long term. If you buy today and sell in 5 years time, there will be a 3.5% initial charge and a 2% selling charge which gives an acceptable average charge of 1% a year. If you intend to sell in a year's time, the total charge of 5.5% would be too high a charge to expect to cover with one year's stockmarket returns.
Let's say that you have €10 000 sitting in a deposit account. Why not leave €9 000 in the deposit account and test the stockmarket with a €1 000 investment in a share of your choice ? Even if the very worst happens and you lose the entire investment, it won't be a disaster. This small taste of the stockmarket will help you learn a lot about owning shares.
It is important to remember that a total loss in value in a blue chip share is extremely rare. A 50% drop in value would be very unlucky. And of course, a 50% rise is more likely than a 50% drop.
So, in summary, if someone asks how much do they need to invest in the stockmarket I will answer that the minimum is
€1 000 as long as they appreciate the risk involved.