Is It Worth It To Buy 1 Share of a Stock? Making money in the stock market used to be an expensive endeavor. There were costs associated with every aspect of trading, from hiring an investment advisor to paying per-trade fees, commissions, and other charges associated with owning a brokerage account.
Making money in the face of all those expenses was impossible without a large portfolio that was generating enough returns to offset costs and still deliver a worthwhile profit. In most cases, it was not worth it to buy one share of a stock because, after fees and expenses, there would be no profit. Losses were far more likely.
Online brokerage firms transformed this entire dynamic by offering no-fee/no-commission trades for stocks. Most eliminated minimum balance requirements and added robust education tools so that even the most inexperienced investors could participate in the stock market.
In this new digital environment, everyone has access to self-service brokerage accounts. With fees and commissions out of the way, it is finally worth it to buy one share of a stock – assuming it’s the right sort of stock.
Consider this: an investor that bought and held one share of Amazon stock when the company first went public would have earned a return of 121,733 percent as of June 2022. Keeping that money in a savings account would have returned a tiny fraction of that figure.
Obviously, not every company will turn out like Amazon. The truth is, very few achieve that sort of success. But if the goal is gaining any sort of profit, it is critical to pass on stock-based “get rich quick” schemes in favor of a thoughtful, deliberate, well-researched purchase of stock in a reputable company – even if it is just one share.
Are Penny Stocks A Good Investment?
When you don’t have much to invest, penny stocks seem like a good solution. After all, you can buy multiple shares for the amount you would spend on a single share of major companies like Apple, Amazon, Alphabet (Google), and Microsoft.
Penny stocks are defined differently by various institutions, but there is a theme that ties all penny stock definitions together: they cost very little.
Whether they land on a penny stock list because they trade at less than $1 per share or less than $5 per share doesn’t matter. The point is that the companies behind them generally have fairly small market capitalizations, and they are often facing complex challenges – a looming bankruptcy, serious debt, or simply the fact that they are brand-new and have yet to attract any attention.
In other words, the one characteristic of nearly all penny stocks is that they are extremely high-risk. True, that means that there is a higher potential reward, but the chances of realizing that reward are slim-to-none.
The trouble is that many investors who are just starting out mistake the recommendations of stock market “gurus” for the sort of thorough research necessary to spot the rare penny stock winner in a sea of stocks that are doomed to fail.
Stock market gurus and scammers promise you will get rich quickly, but in fact, they are the ones getting rich. They persuade inexperienced investors that penny stocks are about to pop.
Once their followers have bought in, the scammers sell at vastly increased prices. When the price collapses a little while later, nearly everyone else loses money. This is known as “pump-and-dump,” and it is just one of the methods con artists use to defraud investors.
Instead of putting your principal into one or more shares of high-risk penny stock on the off-chance that its price might increase at some point, consider buying one share of a reputable company that meets basic criteria for financial health. For example, Coca-Cola is less than $70 per share, and Kroger is under $60 per share. Both have a long history of financial success, and both are committed to putting shareholders’ interests first.
Best Stocks To Buy For Beginners
If you are planning to start with one share, you have some choices to make. The biggest one is, will you focus on growth or income?
Growth stocks aren’t necessarily super-profitable now, but they are in the early phases of the business life cycle. They are expanding rapidly, and that means – if all goes well – that the stock price will go up.
Examples of these sorts of companies include:
Income stocks might not grow as quickly as their growth-focused counterparts, but they do pay dividends. That means a portion of profits goes back to shareholders as cash, which can be reinvested immediately. With income stocks, you will probably see some gains in stock price over time, but the real win is growing your principal balance through reinvested dividends.
Some of the best dividend stocks to buy now – especially if you only want one share – include:
Over time, you can continue to buy more shares if you wish. If you choose a method called “dollar-cost averaging,” you buy new shares at regular intervals, regardless of price. As your shares accumulate, the average price paid evens out. You don’t have to worry about volatility because you are taking advantage of market ups and downs through regular trades. That reduces your risk and builds your long–term wealth.
Is It Worth Investing In One Share Of Stock? The Bottom Line
Assuming you choose a reliable company, it is worth investing in one share of stock. Your money is more likely to grow in the stock market than in a savings account, and you may enjoy stock splits, dividends, and other developments that increase your wealth effortlessly.
If choosing a stock is too stressful, or you prefer an investment option that gives you a diverse mix of companies, you may wish to consider an exchange-traded fund (ETF). ETFs pool investors’ money to buy stock in many different companies. Typically, they want to match the movements of an underlying index – for example, the S&P 500. When you buy one share in an ETF, you get instant exposure to all of the underlying stocks.
Good options for investors who are just starting out include:
Invesco S&P 500 Equal Weight ETF
Most online brokerage firms offer access to ETFs under the same fee schedules that apply to stock trades.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.