Any downside to small brokerage buys?

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sassy_penguin
Posts: 35
Joined: Mon Dec 26, 2016 3:04 pm

Any downside to small brokerage buys?

Post by sassy_penguin » Sat Oct 13, 2018 10:54 pm

I recently took a bit of a pay cut in moving to a new position. I can still fill up all my available tax-advantaged options (Roth, work 401k, etc...), but am left with only a small additional amount past that that is not allocated for a budget.

If I can only do buys twice a month into a brokerage that are for $10-$50, is there any downside? I am still in the accumulation phase, and hopefully will not be selling any stocks for a long, long time. But when that time does come, I did not know if there was some sort of tax or selling downside to having a bunch of small lots. If so, it is no problem to me to just put the small amounts into a savings account until I have a more reasonable "minimum" amount.

Or should I just continue adding what I can to my brokerage account when I can do it regardless of size? Thanks!

ProfWengen
Posts: 20
Joined: Sat Oct 06, 2018 9:15 pm

Re: Any downside to small brokerage buys?

Post by ProfWengen » Sat Oct 13, 2018 11:03 pm

Commission will kill you if you make small transactions (unless you're buying something that's commission free).

CurlyDave
Posts: 755
Joined: Thu Jul 28, 2016 11:37 am

Re: Any downside to small brokerage buys?

Post by CurlyDave » Sun Oct 14, 2018 12:36 am

ProfWengen wrote:
Sat Oct 13, 2018 11:03 pm
Commission will kill you if you make small transactions (unless you're buying something that's commission free).
+1 Try to keep commissions under 2% of total being invested. Less is even better.

viz
Posts: 146
Joined: Fri May 04, 2018 11:22 pm

Re: Any downside to small brokerage buys?

Post by viz » Sun Oct 14, 2018 1:52 am

sassy_penguin wrote:
Sat Oct 13, 2018 10:54 pm
I recently took a bit of a pay cut in moving to a new position. I can still fill up all my available tax-advantaged options (Roth, work 401k, etc...), but am left with only a small additional amount past that that is not allocated for a budget.

If I can only do buys twice a month into a brokerage that are for $10-$50, is there any downside? I am still in the accumulation phase, and hopefully will not be selling any stocks for a long, long time. But when that time does come, I did not know if there was some sort of tax or selling downside to having a bunch of small lots. If so, it is no problem to me to just put the small amounts into a savings account until I have a more reasonable "minimum" amount.

Or should I just continue adding what I can to my brokerage account when I can do it regardless of size? Thanks!
Any decent brokerage would keep track of cost basis so when you sell, you should be okay.
To overcome commission, you can use platforms like M1 or Robinhood if you want to buy ETF. Or use fidelity which has zero minimum on lots of MF now and you can buy them commission free. You can buy ETF commission free at vanguard too but less than 50$ will not buy anything as you can't buy partial ETF at vanguard.

sassy_penguin
Posts: 35
Joined: Mon Dec 26, 2016 3:04 pm

Re: Any downside to small brokerage buys?

Post by sassy_penguin » Sun Oct 14, 2018 6:45 pm

CurlyDave wrote:
Sun Oct 14, 2018 12:36 am
ProfWengen wrote:
Sat Oct 13, 2018 11:03 pm
Commission will kill you if you make small transactions (unless you're buying something that's commission free).
+1 Try to keep commissions under 2% of total being invested. Less is even better.
The two are index funds through Vanguard. VTSAX and VTIAX. My understanding is that there is no transaction/commission fee at all for me to buy more. It says on the page describing each that additional contributions can be as small as $1:

https://investor.vanguard.com/mutual-fu ... fees/vtsax
https://investor.vanguard.com/mutual-fu ... fees/vtiax
viz wrote:
Sun Oct 14, 2018 1:52 am
Any decent brokerage would keep track of cost basis so when you sell, you should be okay.
To overcome commission, you can use platforms like M1 or Robinhood if you want to buy ETF. Or use fidelity which has zero minimum on lots of MF now and you can buy them commission free. You can buy ETF commission free at vanguard too but less than 50$ will not buy anything as you can't buy partial ETF at vanguard.
Cool. So knowing it is for these index funds noted above, you think it should be just fine for me to throw in whatever I can, when I can, even in small amounts? If it matters at all, I planned to use Specific Identification as my cost basis method when withdrawing on the other end.

Thanks for your help, everyone.

viz
Posts: 146
Joined: Fri May 04, 2018 11:22 pm

Re: Any downside to small brokerage buys?

Post by viz » Mon Oct 15, 2018 9:18 am

sassy_penguin wrote:
Sun Oct 14, 2018 6:45 pm

viz wrote:
Sun Oct 14, 2018 1:52 am
Any decent brokerage would keep track of cost basis so when you sell, you should be okay.
To overcome commission, you can use platforms like M1 or Robinhood if you want to buy ETF. Or use fidelity which has zero minimum on lots of MF now and you can buy them commission free. You can buy ETF commission free at vanguard too but less than 50$ will not buy anything as you can't buy partial ETF at vanguard.
Cool. So knowing it is for these index funds noted above, you think it should be just fine for me to throw in whatever I can, when I can, even in small amounts? If it matters at all, I planned to use Specific Identification as my cost basis method when withdrawing on the other end.

Thanks for your help, everyone.
I don't think you can select lots On M1. Though, they do claim to tax tax lots into account when selling to reduce your taxes. One thing that you should know is that M1 executes trades once a day at 10 am so if you place an order later in the day, it will go through next day.

I am pretty sure that on fidelity you can select tax lots.

Please read more about the platform before opening accounts. Also, feel free to send them questions before you open an account. It gives you a sense of their customer service too.

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