Start Investing With Only $100
Join 1000's of Authors at StreetArticles Today!

Start Investing With Only $100

So you have a $100 set aside, and you're ready to enter the world of stock investing. But before you jump head first into the world of stocks and bonds, there are a few things you need to consider. One of the biggest considerations for investors with a minimal amount of funds is not only what to invest in but also how to go about investing. Not long into your investment journey you may find yourself bombarded with minimum deposit restrictions, commissions and the need for diversification, among a myriad of other considerations. In this article, we'll walk you through getting started as an investor and show you how to maximize your returns by minimizing your costs.

Stocks

Stock brokers come in two flavors: full-service and discount. As the name implies, a full-service broker provides much more in the way of service, but it only deals with higher net worth clients. It's not unusual to see minimum account sizes of $50,000 and up at full-service brokerages. This leaves the $1,000-investor with the option of a discount broker. Discount brokers have considerably lower fees, but don't expect much in the way of hand-holding. Fees are low because you are in charge of all investment decisions – you can't call up and ask for investment advice. With $1,000, you are right on the cusp in terms of the minimum deposit. There will be some discount brokers that will take you and others that won't. You'll have to shop around. You also could purchase shares directly from a company through direct stock purchase plans (DSPPs). But some of these plans have a minimum investment amount restriction, which ranges between $100 and $500. With the advent of online trading, there are a number of discount brokers with no (or very low) minimum deposit restrictions. One of the most popular online trading sites is ShareBuilder. You will, however, be faced with other restrictions and see higher fees for certain types of trades. This is something an investor with a $1,000 starting balance should take into account if he or she wants to invest in stocks.

Mutual Funds and Bonds

If mutual funds or bonds are investments you would like to make, it is simpler in terms of minimum deposit amounts. Both of these can be purchased through brokerage firms, where similar deposit rules apply as stocks. Mutual funds also can be purchased through your local bank, often for less than $1,000 when you have an existing relationship with the bank.

If you want to purchase government bonds, this can be done straight from the government through Treasury Direct. The only restriction here is the minimum purchase amount of a bond, which can range from $100 to $1,000.

What are the account minimums?

To the inexperienced investor, investing may seem simple enough - all you need to do is go to a brokerage firm and open up an account, right? What you may not know, however, is that all financial institutions have minimum deposit requirements. In other words, they won't accept your account application unless you deposit a certain amount of money. With a sum as small as $100, some firms won't allow you to open an account. KARAMWAY online investment company offer a good opportunity regarding to your minimum amount, you can start your investment with only USD $100, and they offer up to 10% monthly profit without any work from your side, KARAMWAY is one of the safest Investment company in terms of investment conditions, the volumes of diversity and trading operations as well as volumes of current assets in management.

Learn the Costs of Investing

Commissions

Before you open an investment account, you must also consider the costs that you will incur from purchasing investments once the account is open. In most cases, every time you purchase an investment, it will cost you money (through commissions). With a limited amount of funds, these transaction fees can really put a dent on your $1,000.

Investing in stocks can be very costly if you trade constantly, especially with a minimum amount of money available to invest. Every time that you trade stock, either buying or selling, you will incur a trading fee. Trading fees range from the low end of $10 per trade, but can be as high as $30 for some discount brokers. Remember, a trade is an order to purchase shares in one company - if you want to purchase five different stocks at the same time, this is seen as five separate trades and you will be charged for each one.

Now, imagine that you decide to buy the stocks of those five companies with your $1,000. To do this you will incur $50 in trading costs, which is equivalent to 5% of your $1,000. If you were to fully invest the $1,000, your account would be reduced to $950 after trading costs. This represents a 5% loss, before you investments even have a chance to earn a cent!

If you were to sell these five stocks, you would once again incur the costs of the trades, which would be another $50. To make the round trip (buying and selling) on these five stocks it would cost you $100, or 10% of your initial deposit amount of $1,000. If your investments don't earn enough to cover this, you have lost money by just entering and exiting positions.

Mutual Fund Fees

There are many fees an investor will incur when investing in mutual funds. One of the most important fees to focus on is the management expense ratio (MER), which is charged by the management team each year based on the amount of assets in the fund. The higher the MER, the worse it is for the fund's investors. It doesn't end there: you'll also see a number of sales charges called "loads" when you buy mutual funds. In terms of the beginning investor, the mutual fund fees are actually an advantage relative to the commissions on stocks. The reason for this is that the fees are the same regardless of the amount you invest. So, as long as you have the minimum requirement to open an account, you can invest as little as $50 or $100 per month in a mutual fund. The term for this is called dollar cost averaging (DCA), and it can be a great way to start investing.

Reduce risk with Diversification Diversification is considered to be the only free lunch in investing. (If you are new to this concept, check out Introduction To Diversification, The Importance Of Diversification and A Guide To Portfolio Construction.) In a nutshell, by investing in a range of assets, you reduce the risk of one investment's performance severely hurting the return of your overall investment. You could think of it as financial jargon for "don't put all of your eggs in one basket". In terms of diversification, the greatest amount of difficulty in doing this will come from investments in stocks. This was illustrated in the commissions section of the article, where we discussed how the costs of investing in a large number of stocks can be detrimental to the portfolio. With a $1,000 deposit, it is nearly impossible to have a well-diversified portfolio, so be aware that you may need to invest in one or two companies (at the most) to begin with. This will increase your risk.

This is where the major benefit of mutual funds comes into focus. Mutual funds tend to have a large number of stocks and other investments within the fund, which makes the fund more diversified than a single stock.

A Small Step Toward a Large Future It is possible to invest if you are just starting out with a small amount of money. It's more complicated than just selecting the right investment (a feat that is difficult enough in itself) and you have to be aware of the restrictions that you face as a new investor.

You'll have to do your homework to find the minimum deposit requirements and then compare the commissions to other brokers. Chances are you won't be able to cost-effectively buy individual stocks and still be diversified with a small amount of money. Given these restrictions, it's probably worth starting out on your investment journey with mutual funds. However, like all aspects of investing, it's up to you to do the research and figure out the strategy that suits you best.


Street Talk

No comments present
You May Also Like
Outperforming the Investment Gurus
The stock market reflects changes in the economy filtered by the public’s perception of profitability. Unsophisticated investors tend to trade frequently in response to feelings of fear or greed. Unfortunately, acting on these emotions tends to result in losses. Market gurus attempt to capitalize on the hopes and fears of…
By: james siddall in  Investing  >  Retirement Planning   Mar 19, 2016  
0
  Likes: 1

How To Prevent Heron Theft
Herons are beautiful, majestic birds that have one major flaw. Herons love to feast on Koi, and where better then to find Koi then an unattended Koi pond or garden? When you first notice a Heron in your garden, you may not even think of these birds as a danger.…
By: Makowski Piotr Dariusz in  Investing  >  Retirement Planning   Mar 03, 2016  
0
  Likes: 1

Commodity Prices Have Crashed
There are a number of sure-fire ways to know the economy isn’t doing well. These are time tested, proven indicators. Among them, the price of commodities stands out as possibly the most reliable indicator, closely followed by dry goods shipping costs. When commodities are cheap, it’s because nobody wants to…
By: michael61 in  Investing  >  Retirement Planning   Jan 02, 2015  
0
  Likes: 0

Your Transition to Retirement
Have you thought about your transition to retirement? Young or old you need to think about it. Young people need to plan for retirement and old people need to preserve their assets during retirement. I am not a financial advisor or retirement planner. I do want to tell you what…
By: John T Jones, Ph.D. in  Investing  >  Retirement Planning   Apr 21, 2011  
0
  Likes: 1

Setup Smsf - Establishing And Maintaining Superannuation Yourself
Planning ahead of time and age, one requires the best resources to garner requisite knowledge with respect to saving for a comfortable retirement stage. In Australia, individual belonging to the managerial working class have a shrewd understanding of the financial market. A white collar working professional is aware of the…
By: Redwood Advisory in  Investing  >  Retirement Planning   Jan 02, 2014  
0
  Likes: 0

Smsf - A Means for A Financially Secured Life After Retirement
When looking for a means to ensure that your retirement period is secured with a steady source of income, you will need to look for an option not only yields high returns on your long term investments but grants a level of independence in decision making pertaining to superannuation investments.…
By: Redwood Advisory in  Investing  >  Retirement Planning   Jan 15, 2014  
0
  Likes: 0

USA is Not An Island
The global economy is slowing, deflation is setting in everywhere. Emerging economies have lost their momentum and are falling into recession, while many advanced economies aren’t doing much better. Most countries are in too much debt, some are in far, far too much debt, and have no hope of ever…
By: michael61 in  Investing  >  Retirement Planning   Mar 02, 2015  
0
  Likes: 0

This is Not 2008 Again
With the recent crash in commodities prices, including everything from corn to copper, to crude oil, many are starting to wonder if we’re seeing a repeat of 2008. In Alberta, they rely heavily on oil for the province’s revenues and economy, and have seen many downturns over the past 40…
By: michael61 in  Investing  >  Retirement Planning   Mar 02, 2015  
0
  Likes: 0

The Global Reset
Michael Yates is a financial advisor specializing in alternative investments and extreme fiduciary duty. His company Have you heard of the reset which the International Monetary Fund has planned for the world’s financial system? Likely you haven’t, but that’s ok, most people haven’t. If this weren’t the head of the…
By: michael61 in  Investing  >  Retirement Planning   Jan 01, 2015  
0
  Likes: 0

Wealth Management
There’s an old saying in golf that says, “it’s not how good your best shots are That matters, it’s how bad your worst shots are.” The point is that you can make great shots, but if your bad shots are too bad, you’ll still be a bad golfer. This holds…
By: michael61 in  Investing  >  Retirement Planning   Jan 07, 2015  
0
  Likes: 0

Canadian Real Estate Crash
For 5 years running, predictions of a crash in Canadian real estate have failed to materialize. Industry experts with decades of experience have been baffled by the staying power of Canada’s housing market, as it’s now the world’s most overpriced real estate, using comparative income levels as a measure. Not…
By: michael61 in  Investing  >  Retirement Planning   Dec 30, 2014  
0
  Likes: 0

Best Gold Investment
There are many forms of gold available to the consumer/investor. Gold is present in jewelry, coins, bullion, with very small quantities found in industry, electronics,medicine, and some food and drink.  So what form is the best gold investment? Let's explore the three main forms of gold. Jewelry The purest form…
By: Terri, RDH in  Investing  >  Retirement Planning   Sep 27, 2011  
0
  Likes: 0

No Capitulation, No Cure
For most economists and business leaders, the sum of all their fears would be a cataclysmic crash, much like 2008. Yet, it’s this kind of crash, or capitulation, which is what’s needed and ultimately leads to a true recovery. I’ve chosen the picture in this article purposefully, it’s a perfect…
By: michael61 in  Investing  >  Retirement Planning   Feb 19, 2015  
0
  Likes: 0

The Baby Boomer Retirement Crisis
What is the Baby Boomer retirement crisis you ask? well it’s like this. There are 10,000 Baby Boomers retiring every single day, and this is just the start of things to come. All these people have reached retirement age of 65 and will now be joining the ranks of folks…
By: Dave Swanson in  Investing  >  Retirement Planning   Feb 23, 2014  
0
  Likes: 0

Is Gold A Good Investment in 2011
Investing in 2011? Wow, is that a scary concept. Growing up, I remember my parents putting all kinds of money aside in retirement and 401K plans. When you are young it is hard to understand the concept of investing. Why did they put all of this money in some plan…
By: Terri, RDH in  Investing  >  Retirement Planning   Sep 26, 2011  
0
  Likes: 0

Article Views: 991    Report this Article