How to Invest Online with Little Money
It often seems that online investing is exclusively for financial institutions, or major traders who trade stocks on a professional level. I’m sure it would be good to know that somewhat inexperienced people can also partake in this vast financial market. Anyone who is interested could simply invest a little amount of money into an online brokerage account, and watch it grow with series of intelligent trades. The purpose of this article is to help those who want to get started, guiding them through some key steps in order to minimize loss, and make more gain.
Step One: Finding an online broker
Since you are planning on investing with small amount of money it is best to find an online broker with low account minimums. Normally brokers require a minimum fee of about 1000USD but you could find some with fairly lower rates of about 500USD and some have no minimum initial investment fee.
In finding an online broker one needs to check all the fees carefully, for it is not free to trade. Brokers usually charge per trade. It’s ideal to invest no less than 500USD because you are usually charged over 5USD per trade which means you are already 1% in loss.
One could still avoid brokers and their fees entirely by investing on dividend reinvestment plan (DRIP). Here dividends are not returned in cash but are automatically reinvested into the company, this method is for compounding and price appreciation. There is no fee for some DIRPs, while the others you have to pay a small charge.
Step Two: choosing an investment method
You will need to choose the class of asset – either equities, cash, or bonds. – That you plan to invest in. Hence you will need to know that investing in equities is like owning a piece of the business, and there are stocks which are the riskiest type of assets not suitable for first timers, but ETFs and mutual funds are also volatile but are more stable than buying a single stock, it is like owning a pieces of 100s. Whereas bonds are less risky assets, it’s like loaning out money. And you receive a bond certificate and a percentage of initial investment yearly until the bonds maturity date, when you are paid in full your initial investment. It’s advisable to spread your investment between the classes, 60% equities and 40% bonds at all times.
Step Three: Purchase
Once you have decided, and now you wish to make buy your investment. The principles are fundamentally the same on all brokerage sites, you insert the symbol of the investment you want (google the name of the investment for its symbol), then you enter the amount of shares you like to buy, then simply click on the buy or purchase button and you will own that piece of investment purchased. Once purchase is made the best thing to do is nothing. The market will fluctuate, all you need to do is wait for the upward rebound. Then you can make profits.
Lastly, for example at the end of the year an asset class might have made more than the other(bonds 20% and equities 80%), you will need to rebalance your investment portfolio back to the way you started out – 60% equities 40% bonds.