| In the past, many people bought stocks in what | | | | shares you want and pay the same price. What this |
| were called round lots of 100 shares each time they | | | | means is that you can focus on the more important |
| made a trade. Brokerages also made an effort to | | | | number which is dollars invested instead of shares |
| make sure that investors also followed this practice. | | | | purchased. If you have a $1000 to invest, buy a |
| They did so by making a trade have a cheaper | | | | $1000 of the best stock you can find. It doesn't |
| commission if it was a multiple of 100 shares. If you | | | | matter if it means you only buy 20 shares of a $50 |
| wanted to say, buy 75 shares, you paid a higher | | | | stock or 50 shares of a $20 dollar stock. What you |
| commission. In the end, people did not want to pay | | | | want to focus on is equity selection. Buy the best |
| the higher commission. | | | | stock you can find regardless of price. |
| The effect this had on investors was to train them | | | | The real number you want to focus is the percent |
| to reduce the price of the stocks they traded. It | | | | return you get on your money. Going back to our |
| was much easier to pay for a 100 shares of a $5 | | | | example. If you buy a $1000 worth of shares of a |
| dollar stock which added up to $500 than to buy a | | | | particular company and if you sell it you make $1200, |
| 100 shares of a $50 dollar stock which is a $5000 | | | | your profit is $200 dollars. As a percentage, 200 |
| trade. What this does is make an investor choose | | | | divided by 1000 equals a 20 percent return. |
| cheaper stocks. Unfortunately, in the stock market, | | | | The key then when deciding how much to invest is |
| you often get what you pay for. If you buy cheap | | | | not the number of shares, but the dollar amount |
| stocks, you'll probably get cheap results as well. | | | | invested and the return it generates. |
| Today, though, you can buy stocks in any amount of | | | | |