When you buy a stock, how do you decide how many shares you'll buy?
Most people don't have a clue how to do this. But it's something you have to get right – it's crucial to your investing performance...
So seriously, what's your process for determining how much of a stock you'll buy?
Do you say something like this?
Well, the stock is trading for around $5 a share, and I want around $5,000 of it, so I'll buy 1,000 shares.
Or are you more like this?
I want EXACTLY $5,000 invested in this stock, just like when I buy all my other stocks – so I just divide $5,000 by the current stock price. In this case, I have to buy 987 shares.
If either of these is your "process," then how did you decide on $5,000 for the position?
What makes $5,000 the "right" amount?
You have a reason, I'm sure... For example, maybe you have $100,000, and with 20 stocks in your portfolio, you divide it up equally.
That's a fine answer... But why do you divide it up equally?
Is that the best way?
Have you ever sat down and thought about this?
For example, should you have the same $5,000 in gold stocks as you do in a boring bond fund?
If you did this in the second half of 2016, your portfolio would have been crushed.
Investing $5,000 in each position sounds like a plan... But it's actually just "winging it." And the results can be disastrous.
So what is "right"?
This is THE important question... We've touched on it before. But it's too big a question to fully answer here in a short DailyWealth essay.
However, I talked in-depth about one of the best answers we've found during a special webinar last week...
I met up with my colleagues Porter Stansberry and Dr. David Eifrig – and we discussed a unique service we've set up to help you master this process. It's called Stansberry Portfolio Solutions. And it's designed to help you start investing like a pro... because you'll know the exact number of shares you should buy for every recommendation.
You'll maximize your opportunity. You'll allocate appropriately. You'll follow a stop-loss discipline. You'll finally learn how to "get there" with your investments.
If you missed our discussion last week, click here to watch the video replay now.
Editor's note: Smart asset allocation is one of the most important steps to building wealth. But our Stansberry Portfolio Solutions service goes even further...
It collects the investing ideas that Steve, Porter, and Doc agree could help you safely make the biggest profits in 2018. You'll receive nearly all their most successful research – at a huge discount. And with three model portfolios to choose from (including the one that beat the market last year), it's your best chance to take your investing strategy to the next level. Click here for more details.
Thoughtless position sizing could leave you overexposed to high-risk investments... and underexposed to safer ones...