If a stock only goes up a dollar or two and you are not day trading what is the point of owning stocks?

Question

Lets say a stock is priced at 75 dollars a share and you can only afford to buy two shares of it, if this stock only goes up to 77 dollars what would be the point in even putting your money in it if really all you will make on your 2 shares is 4 dollars?

Answer 1

You first have to pay the broker when you buy and again when you sell. Since you are buying an odd-lot ( less than 100 shares ) you get to pay a premium also.

You probably would not make anything on only 4 dollars of change, and could possible end up paying more than the 4 dollars in fees.

If you don't understand the stock-market, you should stay out of it.

Answer 2

First of all, you don't buy two shares of stock. Put some money in a savings account and wait until you have at least $1,000 to invest. Then, you must consider trading costs. I trade online at $11 a trade, so that limits trading cost. Some people will buy a stock which has a good dividend. That way you have a guaranteed return; then, any appreciation in the stock is gravy. And you don't have to continuously trade. But buying and selling some allows you to lock in your gains and make more gains on those gains - compounding.

I have a stock account which I started less than four years ago. I put $1000 dollars into it and added another $2000 a year later. It is now worth almost $13,000. You can do very well in the stock market, if you are not impulsive.

One big caveat - do NOT listen to media stock types. They are usually wrong; and, even if they're right, they're behind the curve. Look for a company which is solid and has a stock which is currently priced low on its 52-week high.

Good luck!

Answer 3

Despite the modern day 'Day Trader' game, the point of investing in the stock market is long term, not short term. If a stock price is going to remain flat forever, your right, it's a bad stock.

Let's say that 'goes up 2 dollars' is 2 dollars a year. That's a 2.6% return. Little worse than a savings account, so again your absolutely right that's a bad stock.

If, however it goes up 5 dollars, by your thoughts you only made $10.00, but it's now 6.6% return. That's not great, but it's now probably better than you'd get with a regular savings account.

The point of investing isn't today, it's 10 years from now. Buying/Selling stocks in short terms is a lot more like gambling than investing. Oddly we can't gamble in most states but you can day trade anywhere...good adrenaline rush when you hit a winner, but bad days are still bad days.

That $75.00 stock may make $2.00 this year...next year it might double in price...it might halve in price...the stock market is never a guarantee.

Answer 4

I am going to give you some advice regarding buying two shares of one stock. Don't do it. Have you ever heard of risk? Risk is the potential for your stock to go down in value. It could go down by $2 or $40. If you own more than one stock you minimize that risk. If you're investing $150, don't buy one stock, buy a mutual fund. A mutual fund is an investment vehicle that allows you to own mutiple stocks. It helps you minimize the risk of owning one or only a few stocks. This principle is called "diversification". This is a very basic principle of investing and one you need to research and understand before you continue to invest any more of your money. To answer your question, though. The point of owning stock is to keep it for a long period of time and allow it to grow. Don't think about it in the terms of only making $2 in a short period of time. Think of it in terms of buying stocks or mutual funds and holding them for a long period of time. Just as a hypothetical example, assume you buy a $150 growth mutual fund. This type of mutual fund could be expected to grow at a rate of 8-10% a year over a LONG PERIOD OF TIME. In approximately 9 years your $150 will have doubled to approximately $300. Nine years later that $300 will have doubled to approximately $600. And so on. This is just a hypothetical example...actual results may vary. The whole point is this. If you don't want to be a day trader you need to focus on buying quality long term investments and then hold on to them so they can grow over the long term. DO NOT DAY TRADE. 90% of day trader's do not make money. That is a statistical fact. The average person does not have the knowledge, time or resources to be able to make money day trading.

Answer 5

a) Dividends (if you don't know, look it up)

b) This is an unrealistic scenario because people don't generally own two shares at a time. Most companies require you to purchase their stock through a broker, and most brokers have a minimum purchase of 100 shares, $1000, or something in that range.

Answer 6

I wouldn't buy a 75 dollar stock because it has probably gone past it's high growth phase. I usually by stocks that are under 30 dollars per share. I usually buy only high growth stocks, sometimes speculative stocks. I'm young and have many decades before retirement age.