You think a diversified portfolio should have at least 45 different individual stocks. If you have $10K to invest, and are trading at a brokerage that charges you $10 per trade, what percentage of your invested wealth would you be paying to enter into your desired position?
answer in percent
As we need to buy atleast 45 different stocks. So it is adding up to 45 different trades.
Total Brokerage Cost = Number of trades * Cost per trade
= 45 * $10
= $450
The portfolio now has 45 different stocks. The total invested capital was $10,000. The brokerage cost was $450.
percentage on invested wealth spent = (Brokerage Cost / Invested Capital) * 100
= (450 / 10,000) * 100
= 4.5 %
So you will be paying 4.5% of your invested wealth to enter in the desired position
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