How Many Shares Should I Buy of a Stock?

So you've found a company to invest in. How many shares should you buy?

Key Points

Diversify your investment across multiple stocks to reduce risk.
Use available funds to buy exact or fractional shares, depending on the broker.
Consider using commission-free brokers to maximize investment returns.

There are a few factors to consider when deciding how many shares of a particular stock to buy. In addition to your available capital, you should consider diversification and purchasing fractional shares of stock.

With that in mind, here's a quick guide that can help you determine the ideal number of shares to buy.

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An infographic that poses several questions to ask yourself to help determine how many shares of a stock you should buy. — Image source: The Motley Fool.

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A share of stock represents ownership in a company, entitling holders to a portion of its assets, profits, and voting rights.

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Example

As an example, let's say you want to buy hypothetical Company ABC stock, and you have $2,000 to invest. Let's say Company ABC is trading for $268.30 per share. Dividing those two numbers would give you about 7.45 shares. If your broker supports fractional shares, this means you can afford to buy 7.45 shares of Company ABC. If your broker doesn't support fractional shares, you would be able to buy 7 shares.

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Buy-and-Hold Strategy

A strategy that entails buying stocks or other securities and not selling them for long periods of time, sometimes decades.

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However, if your broker is one of the few that still charges commissions, it might not be practical to make small investments. If you are still paying commissions, consider making the switch to a top-rated online broker that doesn't charge commissions on online stock trades.

Let's be perfectly clear: With so many great commission-free options, there is no reason to pay commissions on online stock trades.

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About the Author

Matt Frankel, CFP, is a contributing Motley Fool stock market analyst and personal finance expert covering financial stocks, REITs, SPACs, and personal finance. Prior to The Motley Fool, Matt taught high school and college mathematics. He holds a bachelor’s degree in physics from the University of South Carolina, a master’s degree in mathematics from Nova Southeastern University, and a graduate certificate in financial planning from Florida State University. He won a SABEW award for coverage of the 2017 Tax Cuts and Jobs Act. He is also regularly interviewed by Cheddar, The National Desk, and other TV networks and publications for his financial, stock market, and investing expertise.

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@MattFrankelCFP

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