Trading on a budget?

[adobee]

I am very interested to guage other peoples feelings and advise on the following:

If one intends to buy / trade / hold shares and has a budget of say $30k & is willing to take reasonable risk are they better to stick the $30k into one stock they are feeling good about and ready to take some risk on, or chopping it up into say seven stocks at $5k each.

Is the only consideration here spreading the risk and brokerage costs or other there other factors to consider..

 

[prawn_86]

Re: TRADING ON A BUDGET ?

I think it is a matter of personal feelings. But I only have approx 7k across 5 different stocks. Mainly because I was just starting out etc etc.

It is however extremely risky to put all your money into just one stock as there can be unforseen issues. With 30k I would hold 3 stocks at an absolute minimum. Especially in the speculative sector of the market, it only takes one bad announcement for a small cap to lose a lot of value. And vice versa obviously.

 

[Jockstar73]

I agree with Prawn,
it is risky to put everything in the one stock (IMO)... also remember that say you pump it all into the one stock and it goes down a little bit, lets say 5%. chances are that you will leave it there and hope that it will get back up into the black.. (we all have stocks like this) then this ripper of a stock is on a run and everyone is getting on board (ie: CUL) and you are stuck in the one stock.
With a bit of a spread, you have some opportunity to mix and match and jump around a little. Don't think of the brokerage costs as this is all tax deductible anyway.

 

[tech/a]

Staying in the game is the paramount objective.
Nearly 5 yrs ago we started an exercise using $30K.
Today that $30k is $370K.

How.
A tested methodology.
Sensible Leverage.
Reinvestment of profit and increase in position sizing.
A nice strong Bull Market hasnt hindered things either.(but after all thats what the method was designed to perform in!).

So the very same question was answered 5 yrs ago in this way.
Its still an ongoing exercise presented for those who have an interest as a start on their journey or a chapter in their book.

http://www.thechartist.com.au/forum/ubbthreads.php?ubb=postlist&Board=53&page=1

 

[Adventure Always]

Hello All,

I agree totally with Tech, Capital preservation is the key to survival.

Putting all your eggs in one basket is a very unwise option and is a path littered with mineshafts.

Knowing and understanding what you are doing is the key to success.

The following steps could be viewed as a good guide:

Identifying a high probability entry signal
Identifying the approriate exit position should the transaction go against you
Applying good effective risk/money management techniques which cover, position size, Capital Exposure, Capital Allocation, Stop placement and position management.

Having all of the previous in place prior to placing the order will help immensely.

Have a great day all

Pete