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Sunday, November 12, 2006

The Spread

The next key price then, to understand is the spread. The spread of this situation is the difference between the asking price and the bid price on the stock sale. In many cases, this number is a “built in loss” when you are investing in the stock.

What is this built in loss? It is the fact that you have to take into account the cost of your trade as well as other factors. This would include such things as the transaction fee as well as the fee that your broker will charge you.

If you have a stock that you are looking to sell, you will want to at least break even when you sell that stock, right? But, to do this, there are certain things that you will need to take into consideration. To break even, you will need to insure that all of these extra costsare figured into the price that you sell for.

One thing that you will need to take into account is the fact that you’ll need to know just how much you will need to ask to get the right coverage to break even or do better in the sale of a stock. It can be that the spread can be as much as fifty percent to one hundred percent. In some cases, it will be over that as well. More commonly, though, it is likely to be between twenty five and thirty five percent. Nevertheless, this is a cost to take into consideration.

Beware of any stock broker or other sales person that promises you that you will get the same price that you paid. They are not telling you the entire truth as far as price goes.


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