What size to trade?

Water Cooler Investing
#1

Hi

I recently started my ISA (tax wrapper). Only have £10k in it but adding to it each month and will hopefully be c£20k by May 2018 and then £40k by this time next year.

Commission are quite high, £12per trade buy/sell and I have a 30day hold period on each stock (employer rules). I’ve bot a few bank shares… which were a bit of a mistake. I bot £500 on LON:AZN shortly after it tanked 15% in a single day and i’m making a bit of money on that, I also bot £500 of LON:RBG shortly after it tanked 35% and before news came out that it was subject to a takeover and rose 68%.

My question is, what size should i be trading? Should anything ever sit in cash waiting to deploy? I save £500pm and then top up with bonus at YE so should i invest that £500 each month or wait till i’ve saved £2500 and deploy it then?

Please help, I have an expensive wife.

#2

In general, you should deploy as much money as possible in the market, as soon as possible. However, since your commissions are quite high relative to your monthly contribution, it makes sense to gather more size and reduce the commission dollars per trade.

If you assume about 7% annual return, it looks like you should gather 1500 GBP before investing it. This is the level where your opportunity cost would otherwise exceed your commission.

#3

my commission is 5 bucks. and i usually drop ~$10k/trade. i’ve only recently started picking individual stocks. 30 day holding period is a bit crazy. maybe find a good stock first then stick with it for at least a year or two. i plan to buy and hold forever though.