How much money needed to begin investing in stocks?

What is the minimum amount needed to begin investing in the stock market?

This surely is one of the most common questions newbie investors would like to know.

The short answer: the minimum amount needed is dependent on the PSE Board Lot, which determines the smallest number of shares one can buy or sell.

Continue reading to understand this in more detail.

The minimum amount of cash needed to invest in the stock market varies and depends on the market price of the stock as well as its corresponding board lot. The board lot differs as the price of stocks move through a scale of minimum fluctuations.

PSE Board Lot Table

The Philippine Stock Exchange uses the following Board Lot table.

[TABLE=54]

The Minimum Fluctuations column shows the minimum increments that a stock price can change.

For example, if PLDT (TEL)’s stock price is currently P1,500, its price can move a minimum of P1.00 according to the Board Lot Table. This means TEL can, at a minimum, increase to P1,501.00 or decrease to P1,409.00. Its price cannot move by increments other than P1.00.

The Board Lot column, meanwhile, shows the minimum number of shares a stock can be bought or sold.

So for PLDT, looking at the Board Lot table again, at a price of P1,500 you can buy (and sell) a minimum of 5 shares. Given a stock price of P1,500.00, you’ll need P7,500 to initially buy the minimum five (5) shares.

Some more examples of how to determine the number of share you can buy or sell in the article How to read and use the “PSE Board Lot” table.

What are “Odd Lots”?

There are cases when a company issues stock dividends rather than cash dividends. Stock dividends increase the number of a stocks owned by a shareholder.

Say Ayala Corporation (Stock Code: AC) decided to issue a 5% stock dividend. If you currently own 500 shares of AC, you will get an additional 5% of your stock holdings, that is, an additional 25 shares for a total of 525 shares.

If, for example, the minimum board lot for AC is 10 shares. You can thus sell 520 shares of AC in a normal transaction, but the remaining 5 shares will be considered an odd lot.

An “odd lot,” by definition, is an amount of a security that is less than the normal unit of trading for that particular security. It is also called broken lot or uneven lot. You can still sell odd lots but you might need to pay a higher commission rate compared to round-lot trades or it might be sold at a relatively lower price than the current market price.

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22 thoughts on “How much money needed to begin investing in stocks?”

  1. hello! it is nice to know that there are good information sites such as yours that tackles more on the PSE. I am really a very interested newbie. I have been quite interested with the stock market since I’ve seen the film “the Market” featuring michael douglas. (i also watched thereafter the film prior to that starring MD and charlie sheen, though I forgot the title) therefore, It fueled my interest in the trade.
    I am a total newbie and not a math genius but as I browse to many other sites as well as yours that tackles to real life stock market investment et al., I noticed one real fact. that is, One does not get several millions to a billion in a matter of 1 year..but in the film “the market” it so magically made MD from a 100 millionaire to a billionaire in a matter of months! how is that possible? Isn’t it true there is a restrictions such as board lot, minimum fluctuations and all else that make it quite impossible to make a 1000 fold in profit or even 10 folds just like what the movie so callously showed? unless there is inside trading or the sorts going?
    Pardon my innocence in all these..i just made a random number using the tables and I can’t find a single evidence that .0002 to 5.00 a stock from .001 to 505.00 up can make 100 million into a billion in less than 9 months. I am really happy I found out the truth before I sold all my assets just to invest in stock.
    hmmm movies are really deceiving isn’t it?
    Thank you soooo soo much for enlightening us all. If there’s one important lesson I learned about stock that would be, to invest just a moderate sum of your excess, like 10 to 20% of your excess to be safe. It it does grow, well and good. If not, my bad. lesson learned in the university of life.
    But investing is still a good “other income” generation move.
    Let’s all invest. Only excess.
    Thank you PMT.

    Reply
  2. I am so new here and wondering what is going on. I was thinking what sort of business I can start till I jump of stock market. 2hrs ago till now I keep on reading and made me really interested to be a stock holder. but, I don’t know where and how to start. please help. tnx 🙂

    Reply
  3. just wanna share..i am a newbie in this business like 1 week and now just sold 3 different stocks. may 1000 php na ako. im investing in the Indonesia’s Stock Exchange.

    Reply
  4. Oh no! I are not able to make it and I am so sad! I actually want to go although the girls are throwing me a going away party that night at Angie’s. And i need so much clothes for my new job. So bummed. Anyway, have a very blast and i would go with all the dress its fab! XOXO

    Reply

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