Your Biggest Decision When Trading
One of the questions I often get is how do you get started making money in stocks? And how much money do I need? Or, more accurately, how much money do I need to put into a brokerage account to make it worthwhile?
Well, when it comes to buying individual stocks, there are a few methods that I have found work very well to make money. Which one you should choose does depend on how much money you start with and the time you have to spend on it each week.
For those who have the most limited time, a methodology like the one taught on Investtobefree.com works very well for their needs. The back-tested performance of the 3 Stocks to Wealth newsletter was about 2,000% over the past five years (before commissions and slippage) the last time we checked. A time period that included the disastrous 2008.
And this methodology only takes a few minutes per week to utilize. The newsletter comes out Thursday night and you would change 1 to 2 positions on average per week. Always having 3 stocks in your account dedicated to this approach. This works out to about 150 trades per year because you pay on the way in and on the way out of a stock.
You can start with smaller amounts but generally $10,000 is a good amount to start with. Because a broker like Interactive Brokers requires 10k to get started (5k for an IRA) and generally charges just a little over $1 per trade for most of our trades using the Investtobefree 3 Stocks to Wealth newsletter. Trading costs will add up to maybe a couple hundred dollars per year with that account size which is only about 2% of the 10k.
With under 10k starting capital, you can check other online brokers and the account minimum. Some offer low commissions and even a set number of free commissions for new clients in some cases. Just count on about 150 trades per year with the 3 Stocks to Wealth newsletter.
Another method that I have found works well is to buy and hold. Fortunately, there are normally a few elite hot growth stocks with not only the track record but the strong potential to make huge gains in the future. In our own portfolio we try and find the stocks that are most likely to make big moves over the next year or two. And include stocks that are most likely to be 10-baggers over the next five years.
On Investtobefree.com, we offer an elite subscription that includes our top 3 long-term holds. Its called The Three Generals newsletter. Investing is war sometimes and these generals will carry you to victory long-term.
The other method we found that works well is the Tradetobefree swing trading method. Where we buy elite growth stocks and other stocks with rapidly improving fundamentals as they are completing a pullback or consolidation generally within a longer-term uptrend. And we feature these on the subscription site just as they are near an ideal technical entry point. With this approach, assuming you have 3 stocks in your trading account at any given time, will likely require about half the trades per year as the Investtobefree.com 3 Stocks to Wealth newsletter.
If you are paying more than 10% of your starting capital each year for commissions, it starts to take a more significant chunk of your profits. So at that point, the buy and hold approach becomes more attractive. But if you are disciplined and have the half hour or more per day to use the Tradetobefree.com subscription site, it can still be well worth it.
Hope that helps you decide which route to go and how much you need in the beginning. As always, talk to your personal financial advisor about how much you should put into individual stocks based on your personal financial situation. And then get started down the path of making your personal fortune in the market.
Brian C Neall – Founder