One of the most common ways investors add a stock to their portfolio is by determining the size of the position relative to the entire portfolio
(via Katrina.Tuliao/Flickr)
and then purchasing that number of shares.
For example, let’s say a winning investor has a portfolio valued at $100,000 and has determined to buy a certain stock that is worth $100 per share. He also has determined that the stock should comprise 10% of the portfolio. Doing simple math, we divide $10,000 (or 10% of the portfolio) by $100 to get 100 which means the investor seeks to purchase 100 shares of a stock valued at $100 for a total of $10,000.
Of course, in the real world, the math will not be that simple, but this example represents the easiest way to add a stock to your portfolio. Plus, it would make Math Dude proud.
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