Think you need a lot of money before you can start investing? Not true. Investing with $1,000 or less can actually go a long way to help build wealth over time.
In fact, the earlier you start investing, the better off you may be (regardless of initial capital). For example, if you invested $1,000 in the SPDR S&P 500 ETF six years ago, you’d have $2,900 today!
Here are some options for investing with $1,000 or less:
1. Explore Exchange-Traded Fund (ETFs)
An index exchange-traded fund (ETF) can be a practical and affordable option to get started investing. ETFs are traded like stocks, but built more like mutual funds. They are usually less expensive than mutual funds and can be more beneficial around tax time. Fortunately, they do not require minimum investments and can be purchased in single-share increments just like stocks. In other words, it allows investors with $1,000 or less to build a balanced ETF portfolio.
2. Invest In Stocks Or Trade Options
The traditional stock market is another option to start investing with $1,000 or less. An investor on this budget will need to be careful about stock selection – just one share of a stock like Google (GOOG) can run you $700 already. Buying more shares in a more affordable stock might be the better strategy for the long-term investor. Another good option for those with minimal capital would be options trading. Options investors do not buy stocks outright, they only make money if a stock moves within a certain price range at a particular time. This type of strategy allows investors to make money without having to purchase a stock.
3. Find A Discount Brokerage Platform
For investors with a small account, it’s very important to reduce any unnecessary fees that come with investing. Brokerage fees and transaction fees can quickly eat away at investing profits for someone investing with $1,000 or less. That’s why it’s a good idea to consider hiring a discount broker or brokerage platform that allows investors to make transactions for little to no cost. Minimum balances vary by broker, so it’s important to research the best fit. However, keep in mind that one of the benefits of full-service brokers is that they offer investment advice that discount brokers do not.
4. Save Money With Direct Purchase Plans
A direct purchase plan is the method of purchasing stocks directly from the firm. In other words, the broker (the middleman) is eliminated. However, not every firm sell its shares directly to investors. These firms are not usually listed in the stock exchange market as they make use of Transfer Agents to make it possible for investors to purchase their shares. However, this can be a cost-saving option to eliminate brokerage fees – and maximize any investment returns.