Is Buying One Share of Stock Worth The Bother?
A lot of people seem to be unsure of if they should build a ‘properly diversified portfolio’ or if they should just pick a couple companies (or an etf) and simply invest in that — this is of course entirely dependent on your own personal goals in investing.
If your goal is to make money from investing, I’d argue it’s better to simply buy an etf or research and dollar-cost-average into a few stocks you really believe in rather than trying to build a portfolio of dozens of stocks, as ultimately unless you have tens of thousands of dollars to invest the diversification benefit will be negligible and it’ll take a lot of time to actually research dozens of companies to invest in.
However if your goal isn’t strictly to make the most money possible with the least amount of effort, and you see investing in stocks as a long-term hobby of sorts, then it doesn’t hurt to ‘waste time’ researching and buying tons of individual stocks even if you can only afford one or two shares in each of the companies. It’ll still provide you good education and learning experiences.
What are some good reasons to buy a single share of a stock?
There are a few reasons – none of them are really financial reasons, but most are education related, meaning there’s good reason to invest in single shares of stock if you have the time to do so as you’ll most likely learn much more about investing and finance than if you simply bought an etf and didn’t do any real research.
Anyhow here’s some good reasons you may want to invest in individual shares of stock:
- For many people investing is a hobby or past-time they enjoy, and while they don’t have a lot of money (yet) they can still learn and educate their self through first-hand experience picking and investing in individual stocks — even if it’s just by buying a single share in them.
- Owning a share of a company gives you a larger sense of accountability to your investments — When you’ve paid for a share of stock in a company you suddenly have a vested interest in keeping up-to-date on the news of the company and its progress. This gives you real-world experience in investing and makes it much easier when you do come into money for you to invest it sensibly.
- Investing in single shares of a business can make you feel more compelled to invest more and more every week or month you get paid as you know you’ll be able to add a new company to your portfolio or add new shares to an existing company you’re excited about.
Overall it can be incredibly beneficial for the financial development of an individual to invest in single shares of stock, especially compared to investing in an ETF, as you’ll learn much more and be much more engaged with the markets owning specific company shares vs a basket of the broad market.
What are some reasons NOT to invest in single shares of stocks?
While we covered the positives to doing so, there are also plenty of negatives — namely it’ll take at least a few hours of research per company or per week, as well as ongoing monitoring, to really make it have any of the positive effects we covered above.
It’s also not particularly efficient — odds are you’d be better off going and working a ‘gig-economy’ type job or doing just about anything else to make more money than spending your time researching a company for hours just to invest $100 in the company. However it does provide crucial financial education that is priceless in the long-term, so if you have the free time and don’t have the oppertunity or simply don’t want to work more, then it’s a great choice in our opinion.
Anyhow here’s some reasons NOT to buy single shares of stocks:
- If you are busy and don’t have the time, or interest, in researching individual companies and making hard financial choices then you’d likely not do very well and likely not learn that much investing in individual stocks, be it one share or more, and would likely be better off using a broad-index ETF.
- If you are not with a 100% commission-free broker it’ll cost more to trade individual stocks than ETFs — and buying a single share of stock in particular just doesn’t make sense if you’re not with a commission-free broker.
- Researching tons of different companies just to buy one share of stock in them takes lots of time, and you’d probably make better investing decisions if you spent more time researching a specific sector or handful of stocks, rather than dealing with dozens of stocks you own very little stock in.
Overall as said before I think it’s great to invest in single shares of stock if it’s for the purpose of education and as a hobby, but it’s definitely not right for everyone and it’s arguably wiser to make more money than spend the time you could be working researching stocks you can’t purchase much of.
Buying one share of stock FAQ:
Below we’ll answer a few common questions about buying one share of stock that we either had ourselves or were contacted about in the past — if you have any unanswered questions feel free to use our contact page (linked in the footer/bottom of this page) to contact us and we’ll get back to you as soon as possible.
What companies does it make sense to buy a single share in?
While most of what we said above applies to most stocks, there are a few such as Amazon or Google where single shares are VERY expensive! For these stocks it definitely makes sense to buy a single share, or just a few – with prices per share in the 1000’s of dollars it’s not reasonable for most people to buy more than a few shares in them.
Can you buy single shares of stock as gifts?
Yes you can – however it’s not easy to do and involves lots of tax risks, so it’s not something we’re a fan of, as a result rather than give stocks as gifts I would rather give cryptocurrency, as it’s very easy to gift cryptocurrency to someone, and there aren’t any real tax consequences to doing so.
What’s the best brokerages for buying single shares of stock?
Most brokers now offer commission-free trades, so truthfully any of them will due — personally we prefer schwab or tastyworks for regular investing accounts, however we’d say it’s also worth checking out M1 Finance as they allow commission-free trades for even less than 1 share of stock — you can buy fractions of all big companies using them, and thousands of smaller/medium-sized companies traded on US markets.
How many shares of stock should you buy at once?
This entirely depends on your personal financial situation, but regardless it shouldn’t be about how many shares, but rather how much are the shares worth.
Personally we don’t buy shares in a stock unless we can invest at least a few thousand dollars in the stock — sometimes this is only a few shares or a handful of shares (such as with Google or Apple Stock) while other times this is hundreds of shares such as with Desktop Metal which we’ve recently bought a few thousand dollars in.
Are there any real dangers of investing in single shares of stocks?
Not really for you beyond general investing – which is that you can lose money if the investment performs badly. I suppose there’s one other, which is if you invest in lots of limited partnership stocks it’ll make your tax-reporting a nightmare.
However for the companies you invest in, due to certain fees brokerages charge companies for mailing out (or emailing out) certain documents it can be harmful to the companies their self, as if you own just one share of their stock they may be charged $10~ every single quarter for you being a shareholder. Usually it’s less than that, and companies can afford it, but still it’s not nice to do this to companies, especially small up and coming companies.