Hey, this is Sasha Evdakov and thanks for joining me here for another video lesson about trading, investing in the stock market.
In today's video lesson what I want to do is share with you another frequently ask question and one of the questions I get is " Is there a minimum to investing in big companies? Doesn't make it difficult for the working class to invest?"
Here's the thing about minimums is no there isn't really minimums when it comes to investing in stocks, you could simply invest $1, $500, a $1000, $50,000, $50,000,000, it's whatever you want. However, there are broker minimums so for the broker that actually executes your trade, there are minimums when it comes to those brokers. More so for, if you set up a margin account.
If we take a look here at Interactive Brokers this is one of the broker flat forms here, and you can see here since they focus on active traders, their minimum really right here is $10,000.
Now, of course this minimum could be a little bit less if you're in an IRA or if you're a little bit younger you could see that could drop down the 3,000 but in general their minimum right there is $10,000. That's a base minimum for trading with them and opening up and doing trades.
We also have minimum monthly trades that you also have to do in monthly activity fees. They run their business a little bit differently kind of internet service where you pay monthly. And if you don't hit those minimums then they will charge you but basically they need you to be an active trader. That's how they make money and keep their business competitive.
If we take a look here at TradeKing and you can see they have it right there in their frequently ask questions "Is there an account minimum?". No, at TradeKing there are no account minimums at all. Of course, if you need a margin account then yes there are minimums for margin accounts, typically that's what you will find.
If we take a look here at TD Ameritrade you could see that right here you do the drop down. There is no minimum to open an account, so if you have a cash based account there's no minimum. However a $2,000 deposit is required for margin or option privileges.
You can see that certain brokers they do have minimums others don't and some have it based on the requirements. That is simply to protect themselves, but in general you don't really have a minimum if your trading stocks themselves if you buy 1 share, 10 shares or a 100 shares.
Of course it's a lot easier if you trade a nice round lot numbers such as 100 shares because its a lot easier to get in and out, of that's what other traders are trading in 100 shares, 500 shares, a 1,000 shares, 10,000 shares. Nice even numbers its easier to do the calculations, it's easier to do your projections and so forth.
Trading in rounder numbers is a little bit better in terms of share quantities, even in factors of 10 or 25 or 5 is lot better in doing like 7 shares or 1 share or 3 shares so that is a little bit better.
The one problem where you do run into minimums or growth limitations as the question ask is when you start building your account and you try to grow that account for the future. If we take a look here on screen and you see here we have a percentage of return at the top, and then have a starting balance right here, so if I start with a $1,000 and I make a 3% return, let's just say its 3% per month or per year, it doesn't really matter
But basically, if you had a $1,000 and you get 3% return your ending balance would be right here that $1,030. Your profit which have marked right here would be that $30, pretty simple math. Basically will take that 1,000 multiply it by the 3% and that will be 1,000 back and you'll get that number and this amount of profit its just difference between this numbers. That's fairly simple if you're struggling with this do some basic math and you'll play around it and you'll get it so taking that 3% in the percent of return.
If we drop this down to let's say you're investing $200 and you're doing 3% return, your ending balance at the end of the year or at the end of the month would be $206. So you really all making $6,so the key question I guess you need to ask yourself "Is it really worth it to be trading, investing and risking that money for $6?"
In terms of absolute dollar value $6 doesn't sound a lot. But as your account grow so let's say we take this and we go to $200,000. Now, were talking about $6,000 at the end of the year, and relatively speaking $6,000 a year could do quite a lot of benefits to your lifestyle if you're doing this on a yearly basis or a monthly basis.
If you bump this up to 15%, of course now your looking at $30,000 but if your down to $300, 15% is still phenomenal when you look at it in terms of a percentage of return but it's only $45 on $300. Because the absolute dollar figure just doesn't seem as much.
That's why for me when I look at this and I see a trader that maybe is only trading with $2,000 but getting $300 per month, per week. They're doing 15% that's still fantastic and phenomenal even though it doesn't sound like a lot. Whereas you have another guy who might be trading let's just say a $30,000,000 account and his only making let's say 2% even though his making a lot more $600,000. The difficulty level is a lot easier cause his using $30,000,000 to make that $600,000.
Anyways, you can trade 1 share, 50 shares, a 100 shares, it's totally up to you. There's no really limits behind that, you do have some limits when it comes to opening an account but as far as trading the share amounts, there's no real particular limits to that. Of course if there's no shares available then those are other factors that you'll have to consider because if the stock is only trading 5,000 shares a day and you're trying to buy 5,000,000 shares which is not really possible, because the shares are not out there you'll probably move the stock price quite a bit.
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