How Many Shares Should a Beginner Buy in Stocks?

Invest in quality stocks.

Quality, Not Quantity

Based on risk tolerance and investment capital, a beginner should not be concerned with how many shares of stock to buy, but with what stock offers the securest and best return on investment. Also, diversification helps reduce risk. According to Stock Market for Beginners, "Investors best protect themselves against risk by spreading their money among various investments, hoping that if one investment loses money, the other investments will more than make up for those losses."

Bigger Bang for Your Buck

The only time quantity may win over quality is when investing in so-called penny stocks, which are shares that trade at less than a dollar a share on the over-the-counter market. This is the only opportunity for a beginner with limited capital to buy thousands of shares of a company. However, buying thousands of shares of a penny stock can be very risky because they tend to be volatile and subject to manipulation.

Bottom Line

A beginner should determine the number of shares to buy in a company only after examining its prospectus and trading volume. Owning thousands of shares of a stock that trades at a very low volume can mean that an investor may have a difficult time selling those shares at a desired price.

References

• Stock Market for Beginners: What You Will Learn in the Stock Market for Beginners Guide
• Investopedia: Investing with a Purpose

Resources

• Investopedia: Investing 101: Introduction