Ask the Fool

No Perfect Number

Q: Is there a perfect number of shares of a stock to own? — S.W., Elkhart, Indiana

A: No. Focus instead on the dollar value you want to have invested in a given company. For example, if you want to buy $3,000 worth of Apple stock, divide that by its recent price of around $264 per share. You’ll arrive at 11.4, so you’d buy 11 or 12 shares. Want $3,000 of Ford Motor Company, which recently traded near $9? That would be about 333 shares.

Don’t let any one stock dominate your portfolio. For example, if your Apple shares grow in value to make up 50% of your holdings, that’s a lot of eggs in one basket. It might be wise to trim that position and redeploy those dollars into another stock you’re confident about. Be sure to diversify, owning stock in a range of companies and industries.

Try not to own too many different stocks, though. If you own, say, 50, you probably won’t be able to keep up with them all, reading earnings reports and annual reports and news stories. Also, if a stock that represents just 2% of your portfolio doubles or triples, its overall effect will be small.

Most people might to aim to hold between 10 and 20 stocks. Even those can take a lot of time to manage, though, so consider a low-fee, broad-market index fund, such as one that tracks the S&P 500, for much of your money. Learn more by searching for the terms “index fund” and “Motley Fool” using Google.

Q: Thumbs up or thumbs down for day trading? — R.H., Fort Raleigh City, North Carolina

A: Thumbs down. Way down.

Fool’s School

Brokerage Orders,

Explained

If you’re going to buy and sell stocks through a brokerage, you’ll need to understand the kinds of orders you can place. Below are the main ones:

¯ Market order: Place a market order when you want immediate execution of your trade. The most common type of order, it’s almost always filled, since no price is specified. If the stock soars or plunges unexpectedly, you might pay or receive an unexpected price, but that’s uncommon.

¯ Limit order: This is an order to buy or sell only at (or better than) a specified price (the “limit”). Use it if you have a maximum or minimum price at which you’re willing to trade. If you want to invest in a company but think its stock is too expensive — you can instruct your brokerage to buy only if it falls to or below your limit.

¯ Day order: Day orders expire at the end of the day, if they haven’t been filled yet.

¯ GTC (good till canceled) order: A GTC order stays in place until it’s executed or you cancel it — though your brokerage might cancel it after a few months.

¯ Stop order: A stop order becomes a market order once a stock reaches (or passes) a price that you choose. For example, you might place a stop order to sell certain shares if they fall below $25. The order takes place at the next available transaction price: If the shares close one day at $27 but then open the next morning at $22 due to bad news, your sale would happen at $22.

¯ Stop limit order: With a stop limit order, you specify a minimum sale price or maximum purchase price. So if you place a stop limit order to sell a stock at $60, and the stock falls to $60, the order becomes a limit order to sell your shares for no less than $60 apiece. If your price isn’t acceptable to the market, the transaction may not happen.

My Dumbest Investment

Not Investing Sooner

The dumbest investing decision I ever made was not investing sooner. — S.H., online

The Fool responds: That’s indeed a big blunder, and one that many people make.

About a quarter of Americans between the ages of 25 and 44 have saved less than $1,000, per the 2019 Retirement Confidence Survey — with many of them sporting net worths of $0. That’s tragic, because few of us have pensions to look forward to in retirement, and Social Security retirement benefits alone are seldom sufficient to support us. Indeed, the average Social Security retirement benefit was recently $1,477 per month — less than $18,000 per year.

By delaying saving and investing for retirement, young people are squandering a powerful asset: time. If you save and invest just $2,000 per year from age 25 to 35, and it grows at an average rate of 8% per year (as it might, in stocks), you’ll end up with over $31,000 at 35. If that grows for another 30 years, until age 65, it can top $300,000. That’s the kind of money that can be left on the table if you don’t start saving and investing when you’re still young.

Of course, many people these days are struggling financially, and unable to invest much or at all. But whenever you can, it’s smart to do so. Remember that the earliest dollars that you invest are the most powerful.

The Motley Fool Take

A Fat Energy Dividend

Enterprise Products Partners (NYSE: EPD), a master limited partnership (MLP), is one of the largest midstream companies in the energy sector. It generates lots of steady cash flow, and has already hauled in nearly $5 billion through the first nine months of this year, 14% more than its year-ago level. It distributed about 60% of that money to its investors via a dividend, which recently yielded an attractive 6.7%, and reinvested the rest into expanding its operations.

Enterprise Products currently has $9.1 billion of growth projects under construction — one of the sector’s largest backlogs — including expanding several of its pipelines, building new export facilities and constructing another petrochemical plant. These projects should be coming online through 2023 and provide Enterprise with the fuel to continue boosting its payouts, which it has done for 22 consecutive years.

Despite the MLP’s success in 2019, its shares have gone on sale over the past few months, and it recently sported one of the lowest valuations in the sector. Between the cheap price, the above-average yield and the highly visible growth prospects, Enterprise Products Partners is well worth a closer look.

Note that MLPs require more paperwork come tax time. They provide K-1 forms to be incorporated in investors’ tax returns, and you may want an accountant’s help with that. (The Motley Fool has recommended Enterprise Products Partners.)

EDITOR’S NOTE: The Motley Fool is an investment column created by brothers David and Tom Gardner and distributed by Andrews McMeel Syndication.