Monday, March 19, 2012

Apple Anyone?

Today the news on the web and on CNBC was full of Apple's conference call.

The Board of Apple announced today that they would begin a dividend payment and also announced a share buyback to the tune of $10 billion.

So what do I as a non share holder think?  Do I want to jump on the Apple steamroller?

Honestly at over $590 per share and looking towards over $700 Apple is way beyond my means as far as investing directly.

Is it a bad investment?  No Apple seems to be a very good investment, if you have at least $500,000 to invest.  The cost of buying enough shares in order to make a decent profit and compensate for risk is too much.  I would advocate never buying less than 50 (fifty) shares in a company. Good companies even deserve 100 shares.

Why this policy?

It is in order to decrease the cost per share of all the added costs from brokerage.

Say we take Apple at $595.

Buy one share at a broker charge of $10. We need the price to rise to $605 to break even. But we must hold because our broker charges another $10 to sell. So to sell and break even we need a selling price above $615 but even that $20 doesn't give us profit.

So Apple is too big to be a worthwhile small quantity purchase.

The more shares one buys at a time the better. If one could afford 100 shares on that same apple stock one would only need a twenty cents rise to break even.

This is my first rule.

Consider brokerage in the equations before buying or selling.

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