The million dollar question: Is buying one share of stock worth it? Like most things in the investment world, the answer is it depends. However, with a few key questions and a solid plan, you’ll be able to make the best investment decision for yourself. So keep reading to learn is buying one share of stock worth it and how you can build wealth on Wall-Street.
What is a stock?
A stock is a type of security that represents ownership in a fraction of a company. In other words, it’s a piece of the company that investors own. Stocks are sold via the stock exchange in the stock market.
To buy publicly traded companies, all you have to do is open a brokerage account, fund the account, and place an order. It’s that simple. It’s not rocket science, and you can do it for yourself. But, of course, I recommend you do a little homework and determine if that one share of stock is worth it first.
What is one share of stock?
One share of stock is a tiny piece of a company.
Take this example: If the company has sold 100 shares representing 50% of the company, each share would be worth 0.05%. So if you owned all 100 shares, you would own 50% of the company, 25 shares 12.5%, and one share 0.05%.
But the math doesn’t matter. What matters is that you own a piece of the company. You’re a shareholder. And there’s no better feeling than owning a part of a wonderful company. Congratulations!
Now let’s talk about what it’s worth.
What is one share of stock worth?
The current share price represents the value of the stock. This number will change daily and honestly, minute by minute as shares are bought and sold. You want to focus on what that share will be worth in 5, 10, or even 20 years.
As a buy-and-hold investor, we’re not looking for quick wins. Instead, we’re buying companies we love and holding them forever (you know what I mean). So while one share of stock is worth one thing today, it will be worth something else in 5 minutes and something else in 10 years.
Value is represented by the price set today. It has nothing to do with your purchase price. You don’t lose money when the value goes down, and you don’t make money when it goes it. The only time you make or lose money is when you sell your shares.
Different stocks will sell for different prices. It’s more important to conduct a fundamental analysis to determine the stock’s actual value and cost at the time of purchase. A $1 share price stock can be more costly than a stock priced at $1K per share. You gotta do your homework. Especially if you want to know if the stock is worth it, calculating it’s value is easy; just look at the price it’s being traded. Calculating its worth is much more complicated.
Calculating worth depends on where you see the stock in the future. What’s the projected five-year estimated growth? Is this company innovative? Will it be around for a long time?
If you think the company has potential and you want to own it. You could say it’s worth it to you.
Pro-tip: Avoid margin trading and penny stocks at all costs. They’re just too risky. There are so many great companies out there that you really don’t need to buy penny stocks that aren’t traded on a major stock exchange or take a chance with money that isn’t yours. Instead, learn to pay attention to which stock markets you’re trading.
Is Buying One Share of Stock Worth It
So now, for the nitty-gritty, is there a case for buying one share of stock? Yes. The quick answer is sure; you can make a case to buy a stock with one share. It all depends on your money goals. Hopefully, you’ve outlined how much you need to invest, how often, and the type of returns you need to meet those goals.
One share is a start. Although you’re technically a stock trader, buying one share doesn’t necessarily make you a day-trader. Day traders buy and sell stocks; they don’t invest in them. As a stock trader, you’re in the game by investing in just one stock. Buying individual stocks isn’t gambling like some would like you to believe. It’s no different than receiving company stock as a job perk..well, except you have to pay for it.
All I want you to do is get in the game and get started. If you’re investing with money you can afford to lose, the purchase will always be negligible. On the other hand, if you’re going to be stressed and you can’t afford to lose your investment, I recommend sticking to less risky investments like exchange-traded funds (ETFs) and index funds that mirror the larger market. A better suggestion might be looking for ways to increase your passive income and work on a budget so you can stress about money a little less. And never borrow money to invest.
Here are five quick questions I want you to answer before you hit that trade button:
1. Why do I want to own this stock? I want you to think about all of the reasons to own this company. Focus on the way you feel when you think about the company. Does this company bring you joy? Be sure to consider the company’s potential for growth and innovation. Think about the company’s moat and competitive advantage. What is this company going to do for you as a shareholder and as a consumer? Are you already using their products or services?
2. What’s the best-case scenario for owning this stock? In the best-case, the stock price is going to skyrocket. Although you’re not necessarily making money, the value of your investment is rising. When you’re ready to sell, you’re going to make a profit.
3. What’s the worst-case scenario for owning this stock? Worst case, you could lose your entire investment. How would that make you feel?. Given you are only buying one share, you should survive. If not, go back to the money basics and make sure you have your budget and money goals clearly defined.
Now I get it. Losing money is still painful. And I don’t want to come across as if I think you’re going to lose a lot of money investing. Investing isn’t gambling, and you’re unlikely to lose money if you do your homework. In fact, you’re losing money if you keep your savings in a regular old savings account.
The truth is, losing money (losing value) hurts more than winning money feels good. According to an article on the Motley Fool, loss aversion says that people prioritize minimizing threats (pain) more than maximizing opportunities (pleasure) Ask yourself if you could stay focused if you lose the money.
How can you describe the opportunity cost of what you lost? If the share was affordable, as the price of dinner out, it might not affect you as much as an expensive stock that’s going to cut in the vacation fund this month. Just remember, you’re not always going to pick a winner. Sometimes it’s going to be an expensive lesson to reevaluate your investment strategies.
4. What’s the opportunity cost of not owning the stock? Opportunity cost is the cost of a potential gain when you would have made a different choice. For example, you bought the stock so you couldn’t buy something else (maybe even another stock), so what did buying Stock 1 cost you in terms of Stock 2 or something else.
For example: sometimes I save a little money on my food expenses. This lets me invest a little more that month. So skipping a happy hour saves me $50 that I can put to work for me in the stock market. So what’s investing going to cost you?
5. When do I need to sell this stock? If you want to sell within the next five years, you probably don’t need to buy one share. If you’re only buying one share, it’s probably not going to increase 1 million fold to make it worth selling within five years. However, if you’re going to keep it for 10-40 years, you may find yourself with a nice payday.
For example: If you bought one share of Berkshire Hathaway A in December 1984 for $1,490, that one share would be worth $423,627.94 today (October 14, 2021).
Here’s another fun example: If you bought one share of Apple in December 1980 for $22, your one share would have split five times. You would now own 220 shares worth $143.76 (October 14, 2021) for a total value of $31,627.20. Not too shabby for a $22 investment over 40 years.
As you can see, sometimes one share can be really valuable over time. I just have to say you have to keep investing and monitoring your investments. When you invest in individual companies, you have to be engaged and regularly monitor the company.
How do I build wealth with one stock?
Ok, I think it’s fair to say that we can make a case for buying one share of stock. If that’s all that fits your budget, that’s all you can live without, and it’s a good company, sure, you can go for it and feel good about your decision.
But how do you build generational-type wealth with one stock? How do you build a portfolio with one stock? Well, you build wealth one stock at a time. It’s not magic. Over and over again, you buy shares of the stock. It’s no different than buying 100 shares at the same time. You just keep adding to your portfolio as many shares as you want (and, of course…can afford), or you just buy your one share and leave it alone. But you need a plan.
Develop SMART money goals
Step one to building wealth is to get your goals and priorities in order. You can’t skip this step. If you don’t know where you’re going, you’re going to waste time and possibly money. Be sure to make your goals SMART (specific, measurable, achievable, realistic, and time-sensitive) to be the most successful. Once you have your money goals, set up a budget, it’s not optional.
Make a Budget
Sorry, this one’s not optional. If you’re serious about your finances, you need a budget. A budget will keep you motivated, honest, and on target. It’s hard to keep investing when you’re not tracking your spending. The most important bill you can pay is yourself. If you don’t want to think of yourself as a bill, think of you as an asset. You are an essential asset that you need to invest in. Put your money to work for you making money.
Set up your budget to pay yourself first. If you don’t have enough money left, look at some ways to make extra money and invest that.
Start Investing and set up automatic transfers
Start investing as soon as possible. With today’s digital world with online trading platforms, it’s easier than ever to set up an individual investment account or Roth IRA with a brokerage firm to buy and sell stocks.
It helps when you set up automatic transfers from your bank account to your brokerage account. This is one way to pay yourself first and ensure that you’re investing. You don’t want to spend your investment money. So don’t put off investing for next month, the next raise, or the new year. Start today. Invest early and invest often. Time is your friend. Online brokers like TD Ameritrade and Charles Schwab make setting up automatic transfers easy.
Dollar Cost Averaging is an investment strategy that allows you to continue to buy shares when the market is up and when it’s down. You just consistently invest a certain amount every month (or whatever your set pattern is). The theory is that your purchase price will average out over time. This prevents you from missing out on investing while trying to time the market lows and highs.
The magic of compound interest lies largely in reinvesting dividends. You’re unlikely to notice an individual dividend until the investment reaches a large sum, so why not reinvest them? Reinvesting dividends takes your initial investment and makes it larger every year. So go ahead and check the box to reinvest dividends automatically. Your dividend reinvestment strategy is important.
So, most people who know me know I’m not a fan of debt. Sure there’s good debt and bad debt. I just don’t like it. But, it’s still money that you’re paying someone else to borrow in the form of interest.
When you live with a budget, you can minimize the amount of debt you use by planning how you’re going to spend your money, saving regularly, and using sinking funds. The more you plan, and the less you use debt, the more money you’ll have to invest and buy more shares. It’s just basic math. When you don’t spend it, you can invest it.
Leverage The Power Of Compound Interest
The best investors keep investing over time because they love the stocks they’re investing in. Ever heard the saying, invest early and invest often? The “often” is just as important as the “early.” Sure, buying one share may not seem like much, but it’s guaranteed to add up when you buy one share every month or year. Compound interest works best over time. It’s exponential growth. You may not see it at first, but it will be crystal clear if you give it enough time.
Look for ways to increase your income
Hey, the more money you have coming in, the more you can afford to invest. And I love talking about passive income to fund your investments.
Imagine if you started a side hustle and invested all of your “extra money” instead of spending it. First, of course, you must pay taxes on that extra, so if you make $500, you’ll probably have $400 or so to invest. Take a look at the table below to see what happens, assuming a 10% return on investment (ROI). It’s magic.
|Side hustlemonthly income (total investment)||10 years (gains)||15 years(gains)||20 years(gains)||30 years (gains)|
|$400 ($4800/year)||$79,946 |
Look at what you can do with a side hustle. You can take an extra $400 a month and turn it into almost $290K in 20 years or $825K in 30 years. Not bad for passive income.
Remember, growth in the market is exponential. It bounces around relatively flat for quite some time, but the change is much faster once it takes off.
Lastly, picking stocks is challenging. It’s crucial to stay abreast of current events and company news. There are a few good podcasts out there that provide insight to companies. However, you have to look out for biased opinions. Take stock tips with a grain of salt. Often people give their opinion for personal reasons.
Learn how to invest for yourself:
- Learn how to invest in stocks and how the stock market works.
- Learn what you need to do to analyze a company.
- Read company letters to shareholders. These letters will share valuable insights into the future direction of the company.
Should I Diversify My Investments
Of course, the case can be made to buy one share, but diversification is the goal. Diversification protects your investments. It minimizes the risk of a bad investment wiping out everything.
You can be diversified with multiple different stocks in one sector or different stocks across industries. It’s your choice. Just do your homework.
My Final Thoughts
So there you have it, the case to make one share of stock worth it. Invest early and invest often. One share is a start, but it doesn’t have to be a one-time deal. You can buy one share every day, every month, or every year to build your portfolio. I recommend you look for ways to increase your income to invest more, make a budget, minimize debt, and set SMART money goals to keep you on track. Setting SMART money goals is super important.
Learn how to invest. Most investment strategies will advocate diversifying your investments and making sure you are investing the right amounts. As an individual stock trader, you’ll soon be talking about ticker symbols like a native language.
Tell me, have you ever bought just one share? What are your thoughts about starting with just one share of a given stock?
Theresa is a personal finance blogger. She writes content for busy professional women to take control of their money and investments. She enjoys reading, traveling, cooking, and writing. Her work has been featured on GoBanking Rates, Your Money Geek, Savoteur, the Corporate Quitter, Thirty Eight Investing, and more.