Discipline Is Key to Reducing Brokerage Commissions

The two emotions that strongly characterize the financial markets are fear and greed. Keeping your emotions out of your portfolio could end up saving you a lot of money. Before you make hasty buy or sell decisions remember that there are commissions charged on both sides of the transaction. For example, if we assume that the commission related to an order is $15 per side, a trade that will allow us to crystallize a gain will cost $30 (one buy and one sell order).

Warren Buffett, one of the greatest investors of all time, suggests a hypothetical strategy: every investor is given a punch card with 20 slots, and, each time the investor buys a stock, a slot is punched out. Once all 20 slots are punched out, the investor is done investing for the remainder of his or her life. Using a similar guideline would help many of us not only save thousands of dollars in commission throughout our lifetime but also choose our investments much more carefully.

blog comments powered by Disqus
Google Analytics Alternative