5 Ways to Invest With Little Money

Written by on June 15, 2012 in Money - No comments | Print this page

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Investing is a dangerous tightrope. Invest with confidence by learning the basics.

So you are tired of living week to week, paycheck to paycheck.  The best advice would be to learn the Golden Rule of Finance, save money, put in extra hours at work, apply for every job promotion you can, max out your 401k, and slowly build a nest egg. But you don’t want to to that.  You want to make a fortune in the stock market.  The only question is, how do you invest if there is no cash to get started.  Well good news; this article will teach you how to start investing with minimal capital.

DPP and DRIP:  A Direct Participation Plan (DPP) and A Dividend Reinvestment Plan (DRIP) are both ways to invest directly in a business.  Shares or partial shares of stock are purchased directly from the company that issues them.  Since they are set up by the individual companies they do not all have the same rules or function. Typically the differences between a  DPP and a DRIP are that the DRIPs typically have a requirement of ownership of at least one stock before starting, and in a DRIP all dividend payments are automatically reinvested in the company.
Both plans enable a person to invest a small amount of money on regular intervals and gradually build up a stake in a single company. These are nice long term investments.
Discover more about DPP and DRIPs including a list of those available here

Mutual Funds:  Mutual Funds have historically had very high buy ins, but in recent years many funds have been dropping their minimum purchasing limits.  Finding a mutual fund that can be purchased with $500 is easy, there are even funds that can be bought into for $100.  These are a great starting point for beginner investors to get learn the basics.

Certificates of Deposit:  For those wanting to play it safe, the CD is the best option.  Returns aren’t great, but bank issued CDs are insured by the FDIC.

Internet Brokerages:  Look for sites such as sharebuilder that do not have minimum investment amounts.  Trading in stock is very dangerous, especially for those without the money too withstand a downturn.  But no pain no gain.  If you want to really get into the high risk stock market then direct trading is the way to go.

Exchange-traded funds:  ETFs are like Mutural Funds in that they are investment funds tied to multiple funds.  ETFs are typically tied to indexes with shares of an ETF traded on an exchange.  So buying a share of an ETF that is tied to the Fourtune-500 index would be like buying a tiny fraction of every Fourtune-500 company.

It is getting easier and easier to invest small amounts of money in the stock market with companies and brokerages trying to get more investors into the system.  With patience and a long term strategy it is possible to slowly build a strong investment portfolio.  It is also possible to lose everything in a few hours trying to trade to a fortune.  The choice is yours.

Image(s): FreeDigitalPhotos.net

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About the Author

Matt Brand

Matt Brand is QLR's money saving expert. His experience with credit cards and student loans have made him take a strong interest in personal finance, saving money and sharing his knowledge. He is passionate about teaching others how to avoid the trap and make smart financial decisions. View all posts by Matt Brand.