One of the questions that I asked myself last time was that, what is the ideal position size for me in order for the fees to make sense. I tried googling this and couldn’t find any answers.
This was a concern to me because there are sayings that the fees could kill you and even if you manage to identify a good stock, you will end up not making money after paying for the fees.
So how much stock should I buy in order for the returns to not be diminished by the fees?
So I thought it will be good to calculate and journal this down so that this can be a good future reference.
For calculation purposes, we will be using the fees charged by our default brokerage DBS Vickers.
For DBS Vickers, here are the various fees imposed when you buy or sell a stock via their stock brokerage:
With this in mind, we draw out the various fees if we were to buy stocks worth between S$1,000 to S$10,000. Here’s the resulting table:
From the table, if you buy S$1000 worth of stocks, the total fees for you to buy and sell the stock will be S$54.36. What this means is that the stock will have to go up by 5.44% for you to breakeven.
Similarly, if you buy S$2000 worth of stocks, the total fees for you to buy and sell the stock will be S$55.21. For you to break even, the stock will now only need to go up by 2.76%.
Based on the table, you will see that, the more you buy, the percentage gain on the stock for you to break even will drop.
From the table too, it seems like the ideal position to be S$6,000, for you to enjoy a breakeven cost of 0.98%, which is less than 1%.
If you buy S$8,000 worth of stock, the stock will only need to increase by 0.68% for you to breakeven.
When Mr Budget first started buying via DBS Vickers, his average position was around S$2,500 to S$3,000. This is without the knowledge of the percentage needed to breakeven. Hence if you see Mr Budget’s portfolio, the stocks in which are in the S$2,500 to S$3000 positions are those that were bought more than 1 year ago.
For now, our average position size is around S$4,000 to S$5,000, and if we are confident in the counter, may go up to S$6,000 to S$8000.
Hopefully we will be able to increase our position size to around S$8,000 to S$10,000 per counter in the future, so that the fees will be negligible.
What is your average position size? 🙂
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