No, you don’t have to be a millionaire to invest. If you have small amounts of money, here are wise ways on how to invest it:
If you have $50 to invest, you should consider buying stock directly with direct stock purchase plans (DSPs) or dividend Reinvestment plans (DRIPs). To save money you should go for plans that don’t charge transaction fees.
If your best company doesn’t have a DRIP plan, you should find a broker who will allow you to set live DRIP accounts from where you will buy stocks at low prices.
Another great way of investing $50 is through mutual funds. To make the investment easy for you, you should allow the computer you want to invest in to automatically deduct a given amount from your bank account.
$500 isn’t a lot of money, but you can invest it in a number of ways. One of the ways is by investing in an index fund that tracks the broad market. The good side with index funds is that once you have made the first deposit, you have the freedom of adding as much money as you want without additional costs or commissions. You also have the freedom of stopping investment whenever you want.
Another way of investing $500 is in a certificate of deposit. This is where you loan money to a bank or any other institution and then the institution pays you back the money with some interest. In most cases, the interest is between 5% and 7%.
Points to remember when investing
You should remember that the amount that you set aside for investing should be 100% for investing; you shouldn’t use it in any other way. You should also remember that the amount you invest won’t be easily accessible to you; therefore, you should always have an emergency fund that you use during emergencies.
You should note that there is no 100% guarantee that you will always get a return on investment; therefore, you should have a plan of what you will do in the event you lose your money. If your life will grind into a halt when you lose money, don’t invest.
These are some of the wise ways that you should invest small amounts of money. You should remember that there is no maximum amount of money that you can invest. After investing, always keep track of your investments for tax purposes.