Once you enter the start market game and started your journey to financial literacy, your first question will be: "How much should be my minimum stock market investment?"
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Let us face it, not all stock market participants have the luxury of having a big buying power (BP). The money they invested in stocks are hard-earned money and not some excess laying around. To minimize risk, we tend to define the minimum investment amount.
If you do a little bit of digging through social media groups and blogging websites, you will find that they generally point to the 8k rule.
What is this 8K Rule exactly?
Generally speaking, this is the minimum amount that you need to invest on a stock to beat or at least match the broker's commission.
Let us take COLFinancial for example, for retail investors like you and me, the broker commission is 0.25% with a minimum of Php20. For broker-assisted investors (these are premium accounts), their commission is at 0.5%.
Given this figure, the 8k rule is mostly applicable to retail investors.
Dissecting the 8K Rule
Refer to the sample table below:
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| The Fabled 8K Rule: Sample Computation of Broker Commission. |
As you can see from the above example, you need to buy 90 shares of BDO at Php92 to reach the maximum broker commission threshold.
So it is not exactly 8k?
Well, that is true. The price of a stock has an equivalent minimum boardlot. For BDO at Php92 it has a minimum boardlot of 10.
However, one thing is sure no matter what the price. The minimum commission of Php20 will reach its peak at the Php8,000 range. Meaning, as long as your invested amount is exactly or slightly above 8k, you've already beaten the minimum broker commission.
Now that you are equipped with this knowledge, next time you buy a stock, strive to always buy at 8K or above range.
Maximize the Minimum.
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