A:

A round lot is a predetermined number of shares of stock - usually 100 shares, while an odd lot refers to any number of shares that is not evenly divisible by 100 (usually less than 100).

Odd lots are the preferred method of purchase for many investors because it allows them to purchase smaller amounts of a particular stock. Further, they can base their purchase on a set dollar amount rather than on a specific number of shares. For example, the purchase of $165 worth of Company X would results in 27.5 shares at $6 per share.

While this method gives the investor more flexibility, it can be more expensive, primarily because of the transaction cost involved in purchasing stock. Commissions usually are charged for each transaction. Therefore, the cost per share to purchase 60 shares of a stock would be higher than the cost to purchase 100 shares, after commission fees are added in to the transaction. The amount of increased expense is dependent upon the cost per transaction of the service that the investor utilizes.

To learn more about this topic, read What's the smallest number of shares I can buy?

This question was answered by Katie Adams.

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