There are many people who look at investing as something beyond their reach and only affordable for the wealthy who have the disposable income to buy hundreds of thousands of shares in a company. The truth is that investing is for everyone and the sooner you start, the quicker you can grow your wealth and prepare yourself for your financial future.
You don’t even have to deplete your savings to begin your investment journey. Just put aside the money you would spend on your morning latte or other small items that you can do without to start your investment portfolio. If you are looking to invest with little to spend, consider some of the low-cost investment options listed below.
A small investment option for investors just starting out are dividend reinvestment plans, often referred to as DRPs or DRIPs. These stocks allow investors to directly obtain stocks from a company without the added expense of using the services of a broker. Most of these options only require you to purchase one share of stock to get a piece of the action.
There are many benefits with opting for a DRP, such as the ability to invest a specified dollar amount on an ongoing monthly basis. This allows you to be able to invest in the market during both its ups and downs which will provide you with a more representative return over the life of the stock. DRPs also provide dividend reinvesting which means the dividends you make will be reinvested, giving you a larger portion of stock.
The advent of discount brokerages online has allowed armchair investors the ability to invest in individual stock purchases themselves with as little as $5 to $10 fee per trade. This leaves you a large portion of the money you have to invest to be put into the stock itself instead of them being spent on brokerage fees. With these services, investors also have the option of being able to purchase fractions of large shares in up to 70 companies traded publicly. If you want to invest in major companies like Virgin American, you can spend as little as $10 towards the purchase of fractional stock.
A great investment opportunity for those looking to trade for less than $5 per share is to invest in penny stocks. Penny stocks represent smaller companies that are trying to establish themselves on the open market. Since the companies are just starting out, the investment is considered a more volatile one with the risk of considerable drops in share prices overnight. Though when proper research is done and investors learn the knack for trading them, they can also result in an incredibly high profit.
When choosing penny stocks, you will be making your trades from one of four tiers that these stocks fall into.
- Tier 1 – Shares trade at $5 a share or slightly higher.
- Tier 2 – Shares trade for less than a dollar a share.
- Tier 3 – Shares are less than a penny.
- Tier 4 – Prices are triple zero rates for a share.
Take advantage of investing early even if you don’t have much in the bank by considering one of the low-cost investing options listed above.