Quick question. you invest little by little (let’s say less than 100€ each time you buy, for instance something like 25€ or so to DCA). In your opinion, is it better going with higher amounts per purchase or it doesn’t matter, due to fees are correlated to the amount you spend?
On the long term, and talking about the same asset, does it matter spending for example 1000 in just one buy or, on the other hand, divide 1000 in portions of 25 (so 40 purchases of 25)?
In terms of fees,taxes is the same?
Well I believe all fees and taxes are %, so it doesn’t really matter what the amount invested is.
If you had a flat out fee/tax, ie 1e per order. Then it would make sense to bulk up each batch vs small batch.
On Trading 212, it makes no difference how little and often you invest, that’s what I love about it. But in terms of tracking your investments, it becomes much more difficult. If you have to report taxes, it will be more work going through 365 transactions compared to 12.
In terms of the effect on your portfolio, the evidence I’ve seen suggests that lump summing your investments works better. Therefore, putting the money in as soon as you get it instead of delaying it should work better in theory. But whatever works better for you!
You could be prone to rounding errors and minimum regulatory fees on certain stocks.
I don’t see how you are really affected, the fee is baked into the forex rate and that’s down to many decimal points, unless you are buying £1 in a stock the size of Amazon or larger I don’t see how you would get rounding errors. Fractional shares go down to really small values.
But for stamp duty and stuff yeah you have to pay minimum 0.01p, so investing 1£ you pay 1p, not the 0.005p but why would anyone invest £1 at a time?
That’s the kind of thing I meant. If regulatory fees operated on a simple round, then a fee of 0.006p would round up to 0.01p and so on.
after trying out daily deposits for 2 months I stopped, it just had little to no point when I get paid monthly and could make chunk deposits and allocate the funds for almost no difference in return. so much easier to calculate all the costs and profits of a position when you only have to search through 24 lines and not 700+ for a 2 year period
in theory there will be rounding errors, but there is no control to measure it against as the specific number of fractionals is not fixed no matter how large or small the order. delay a couple seconds and you could get less fractionals, delay some more and you might get more, but those numbers hardly even add up to a single penny after many transactions so it’s almost a moot point
edit: this is also why I find it silly how many people get so worked up over a very small card transaction fee of 0.7%, you can’t guarantee any specific returns in the future, but they act like they will “lose” thousands in the near future after many years of 9% returns when they “could have gotten 10%” (it would still have been 9%, just with a slightly larger balance that is barely a rounding error…) one bad year and any fee’s they may have had to pay up to the point become irrelevant afterwards as you would have just lost that extra balance anyways. not a popular opinion, I know.
It does indeed round, I tried it in the past, you pay full penny
the bad, typical financial kind of rounding then ugh.
For US stock (the last one I saw it) there is 0.15% Currency fees with minimum rounding of 1c or 1p.
Trading 212 will only allow a “limit order” of minimum $50. For this you will always exceed the minimum rounding.
But Trading 212 will also allow you a “market order” as low as $1. So, the currency fee for $1 market order will be 0.15c which will be rounded to 1c. Unless you do huge amount of small market order there is not any noticeable different. For many people 0.15c and 1c does not make any difference.
Are you sure about this? Can someone who actually does this small orders confirm that?
I understand if the fx fee is 0.0065… should be rounded to 0.01£. But not in the 0.0015 from 1£ order.
@pintas I have not tried with $1 But I remember I bought $5 in the past. 0.15% of 500c should be 0.75c but it was rounded to 1p. If someone else could try it, it will be great.
I tried a few minutes ago. 0.15% of 482p should be 0.723p. It was rounded to 1p. I think the reason for 1p is minimum because no way they could bill you for 0.723p
What would have happened if you placed a trade for half the amount - the fee would be 0.36p so zero or 1p?
In summary it seems investing small chunks DCA in bear market like this is a no brainier, the only downside is that nobody knows when a bull market starts until long after it has started - so there’s a risk in holding back putting your money to work
While you think that DCA in a no brainer, there are still people out-there the blindly listening to headline Not to time the market without using their common sense adapting to the environment they are in. It is the same thing with jumping in the river full of crocodiles without probing the water first. Just imagine what happen now to the people who blindly throw their lump sum (say £300k in one go) November or early this year.
The fee you pay will be the same whether you are buying in a smaller chunk or buying Lumsump if you are using a near zero fees, which does not charge you the trading fees like T212.
Your FX fees, Stamp duties (for UK stocks) will be the same whether you buy 100 stocks in a smaller chunk of 10x10 or you just buy in one go 100 stocks at the same time, as it is calculated based of the number of share you are buying.
DCA during the bear market or the market downturn (instead of lump sum) is already recognised as a smart strategy since ages.
Here are just a few examples of the links from authoritative sources
Strategies for a Bear Market Smart Strategies for a Bear Market By The Investopedia Team May 30, 2022 Reviewed by Robert C. Kelly Fact checked by Diane Costagliola
https://www.capitalgroup.com/pcs/insights/articles/benefits of dollar cost averaging spring 2020.html A simple approach can help limit the downside during a bear market
https://www.fool.com/investing/stock market/basics/dollar cost averaging/
Generally speaking, dollar cost averaging works best in bear markets and with securities that have dramatic price swings up and down. It is those times, and those types of investments, where reducing investor anxiety and fear of missing out tend to be the most important.
https://www.investors.com/etfs and funds/mutual funds/dollar cost averaging is good for a falling market/ Dollar Cost Averaging Good In A Falling Market JULIE MAK 04:06 PM ET 01/14/2016