Tag Archives: RESP shares

Why Would It Be Worth Buying or Selling Only a Few Shares?

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Because you usually must pay a trading commission of $7-10 (in 2023), it’s usually best to buy and sell significant numbers of shares to lower the cost per share for the transaction. There are some circumstances, though, where it’s worth buying or selling only a few shares. Here’s why:

Written: 2012
Reviewed: 2023
Revised: 2023

TFSA Limits May Require Buying Fewer than 100 Shares

Some stocks are expensive. In 2012, a single share in the TD Bank cost $81.70. That means 100 shares of TD would cost $8170 plus the fee.

The  annual TFSA contribution limit for 2013 is $5500. The annual limit for 2012 was $5000. The annual TFSA limit for 2023 is $6500.

So in 2012, you could only buy $(5000-fee)/81.70 shares of TD with that year’s TFSA contribution. If the fee was $29 exactly, you could buy only 60 shares. (You’d be left with a few extra dollars: you can’t buy partial shares through most online brokerages.) Similarly RRSP and RDSP limits may also require buying fewer than 100 shares.

RESP Limits Also May Limit the Number of Shares Purchased

RESP limits may be even smaller than TFSA limits. In fact if you only have one child and you are only planning to contribute the amount per year matched by the government CESG (grant), you could be investing as little as $2500 per year. That won’t buy a lot of shares of CNR at the 2012 price of $98.40.

Adding to a Stock Position with Incremental Purchases
Sometimes, you like a stock so much you want to buy and hold it for months or years. In that case, you may decide you want to add more to your collection when you see it at a good price. You may have a limited amount of cash available to invest, though. For instance, you might have received dividend payouts from several other stocks, plus a capital gain on a small sale.

Again, you may decide you want to buy say, 50 shares of CNR to add to your existing shares.

The slight advantage of this strategy is you only have to pay one fee when you sell all of your holding in the company, even if you had to pay several fees to buy the shares. For example, if you bought CNR 3 times and then sold it all off at the end, you would pay 3x$29+1x$29 = $116 in fees. If you bought and sold CNR three times, you fees would be 3x$29+3x$29 = $174.

Taking Partial Gains by Selling Part of a Stock Holding May Require Selling Fewer than 100 Shares

Sometimes a stock does well, in fact really well. It’s tempting to hang onto it hoping it will continue to go up in value. But a nagging voice inside may say it would be better to take the profits in hand now. After all, at any time a stock can also plummet.

For instance, as I was tempted to take $15 a share profits in CNR the other week, the stock fell $5 a share on a low earnings warning for Norfolk Southern. Oops! Waited too long.

One compromise approach is to take partial profits.

Say you bought 150 shares of CU at $50. After 8 months, the shares have increased in value by 20% which is an increase of $10 per share. You may decide to sell 50 of your shares. That would ensure you a profit of 50x$10 = $500 (less fees) on an investment of 50x$50 = $2500.

Your remaining 100 shares could continue to earn dividends and hopefully continue to increase in value. Meanwhile you could take your original $2500 plus $500 (less fees) profit and try to find another investment with the potential to grow 20% or more, again.

The actual number of shares you keep or sell isn’t particularly important. What is important is that you can sell fewer than 100 shares if it helps you manage your money and risk effectively.

Disposing of Split Shares
You may also want to sell a small number of shares is after a company reorganizes its stock. For example, you may own 100 shares in Really Big Company. Then, they reorganize, spinning off a new smaller company. As a shareholder, you may be given an additional 25 shares in Really Tiny Company as part of the deal. If you don’t want them, you will want to sell them. Luckily, it is possible and permissible to sell just 25 shares.

This is exactly how I ended up the proud owner of 4, yes 4!, non-voting shares of Telus stock. I won’t tell you the obscene capital gain I have earned to date on those 4 shares, by the way. Let’s just say we could do lunch!

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Have you ever bought or sold fewer than 100 shares? What made it worth your while? I’d love it if you would share a comment with your experiences.

Can I Buy or Sell a Small Number of Shares of a Stock, Say 18?

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One question I had when starting out was whether I had to buy 100 shares of a company’s stock or if I could buy fewer. Most of the investing books I read were written in the days when shares were traded manually by people, not electronically by computers. They kept talking about “odd lots” and penalties and making it sound impossible or immoral to buy or sell fewer than 100 shares at a time.

Written: 2012
Revised: 2023
Reviewed: 2023

You Can Sell or Buy the Number of Shares You Want

With most discount online brokerages, you can now sell or buy the number of shares you want. The number of shares does not have to be a multiple of 100. You can buy or sell 1 share!

Testing the Theory with BMO InvestorLine
Since I never believe anything completely until I’ve tried it, I did try to sell 18 shares of Canadian Utilities. I experimented using my BMO InvestorLine account. The sale went through perfectly. And, yes, I made a tidy (little) profit!

Commissions and Fees May Be High for Small Share Sales and Purchases

Most customers pay a fee each time they buy or sell shares. For example, at some Canadian online brokerages for customers with small accounts, the fee is about $7-10 as of January 2023 (It was $29 in October 2012!) for each sale or purchase of shares in one company.

So if you buy 1 share, you pay about $10. Or if you buy 1000 shares, you pay about $10.
If these fees are relatively high compared to the growth in value of the stock they may limit your ability to diversify your holdings. For instance, if you have to pay $10 for each type of shares you buy, you may not be able to afford to buy shares in 10 different companies in 10 different types of business.

Beware of Paying Extra Fees When Buying or Selling Odd Lots Across Several Days

Another problem can arise if you buy or sell shares in quantities that aren’t multiples of 100. For instance, say you want to buy or sell 129 shares.

Most brokerages trade shares in “lots” of 100 shares. So first you might “fill” your order to buy/sell 100 of your 129 shares. Then another person might finish by buying/selling your other 29 shares.

If both those transactions happen on the same day, your brokerage will only charge you one commission fee. But if they happen over 2 days, you will get charged a commission fee on each day. So instead of costing you $10 it could cost you $20 to completely buy or sell those 128 shares.

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