How to manage your own portfolio online without allowing brokerage fees to take too much of your money?

I recently decided to try and take control of my own portfolio and open an online brokerage account. I would like to take at least 20 positions, but that would mean at least 199 dollars in brokerage fees alone. Since I have only about 1000 dollars per month available to invest, how can I diversify without spending close to 20% on brokerage fees alone? I also invest in mutual funds, but I want to try and beat their performance with my own picks, but since brokerage fees seem to eat up so much of my initial investmant, I would really have to hit it big with my picks before I made any money and so far I haven't even recovered the cost of my brokerage fees. Are mutual funds the only way to avoid high brokerage fees? I know that mutual funds charge management fees, but I don't think that it's 20% of my investment. Any suggestions?

It sounds like you have a good handle on the issues that you will confront. Modern portfolio theory says that you optimize your portfolio where you have maximum returns given the risk of the investments. Remember that the market only rewards you for market risk and not individual firm risk, so diversification, like you are looking for, is the way to go. Unfortunately, there are some studies that show that you begin to approach market risk in your portfolio once you have bought between 30 and 50 stocks. In addition to the brokerage costs, the time that you would spend actively maintaining a portolio to be truly diversified would amount to a full time job (not to mention the headache of doing your taxes with all the gains and losses). Mutual funds offer some of the benefits of diversification, but will cost you if you are not careful in selecting based on load and management costs. Over the long term, very very few portfolio managers continually beat the market, and the ones that do charge a premium for their services (look at Warren Buffet of Berkshire Hathaway) which erodes your gains. Typically, the easiest and cheapest way to diversify it to buy index funds. Since these fundes are constructed and maintained by a computer to mirror the risk of the market, the idea is that you receive what the market returns over the long term. An additional benefit of these funds is that you do not need to worry about management tenure, turnover within the fund, or any of the other considerations normally associated with actively managed funds. Hope this helps.

you need an online discoutn brokerage.
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Scottrade is $7 per trade.

If you are going to invest $1000 per month, you will spend $140 making 20 trades. Don't fall into the trap of assuming that you need to buy 4 shares of 20 stocks to start. That will eat your money up in transaction fees.

Buy 4 stocks, next month buy 4 more, etc.

Mutual funds allow you to diversify with one purchase. If you are looking for mutual funds that make a lot of money, look at the list that comes up with the link below.

Scottrade charges nothing to get into OBCHX, which is the highest performing mutual fund Year to Date.

sharebuilder.com

Check out Interactive Brokers. Basically they are $1 per trade, but you have to watch out for minimums and exchange fees. If you are active they blow away Scottrade, Etrade, etc.

I would recommend ETF's instead of mutual funds to handle diversification needs. Then overweight certain sectors by buying individual stocks in them. Hopefully you can stand to overweight the sectors that have stocks you like. Buying a drug stock just because you "need" a drug stock for diversification is the kind of loser's game mutual funds play. If you have some Spyders then you have all the drug stocks you really need, unless you find an exceptional one to buy stock in.

Good luck.

You cannot trade on 20 stocks with $1000 even if you use Scottrade $7.00

Your strategy is going to produce a lot of profits (TO YOUR BROKER)

It looks like you need the help of a Financial Advisor.

There is no point in having a very diversified and balanced portfolio if you end the year with a return on your investment of 4.80% because you paid thousands of dollars on comissions.

For that, just open a Savings Account at HSBC and forget about it for a year.

TALK TO CHUCK!