So, you are
prepared to enter the world of stock market investing and you have set aside only
$1,000 for that purpose. However, before you plunge into the complex world of
the stock market, there are certain things you should put into consideration.
One of the many concerns for investors with limited funds isn't only what to
invest in, but also the way to go about the actual investing. You’re going to
discover that not long after you enter the stock investing market, you might
find yourself facing a lot of considerations from minimum deposit restrictions
to the importance of diversification among others.
Do you know the account minimums?
Stock investing may
appear straightforward enough for the seasoned investor - All you have to do is
open up an account with a brokerage firm. But, is it that simple? What you
might not understand is that all financial institutions have minimal deposit
conditions. What this means is that unless you deposit a specific amount of money,
they will not accept your account application. With an amount as little as
$1,000, some firms wouldn’t even consider you as an investor, talk less of
opening an account for you.
Stocks
Discount
brokerages have fees that are significantly lower than their counterparts,
however do not expect them to assist you with any investment decision. Their
charges are low because with them, you're in charge of all investment choices -
you can’t ask for investment advice from them. With only $1,000 as a start-up
investing amount, you're really on a tightrope as far as minimal deposit goes.
Some discount brokerages like Banc De Binary will accept you while others will not. You’re going to
need to look around until you find one that will accept your minimal deposit of
$1,000.
Know the Costs of Investing
Commissions: Before you set
up an investment account, you also have to think about the associated costs
that you’re going to attract from buying investments. Usually, it’s going to
cost you some money each single time you buy an investment (through
commissions). And with a small amount of funds, these broker commissions can
really poke a hole on your $1,000.
Furthermore,
investing in stocks can really get expensive when you trade continuously,
particularly with a minimal amount of money available to invest. Each time that
you perform an investment action, whether selling or purchasing a stock, you
are going to pay a commission aka trading fee. Trading fees can range anywhere
from as low as $10 for each trade to as high as $30 for some discount
brokerages.
Use Diversification to Minimise Risk
Some investors
regard diversification as the only free lunch in investing. When it comes to
diversification, the largest amount of difficulty in doing this may come from
investments in stocks. Moreover, with a $1,000 deposit, it's almost impossible
to have a well-diversified portfolio, so be mindful that you may need to invest
in one or two firms (at the most) to begin with. And this is likely to increase
your risk.
A Small Step Toward a Great Future
It’s very
possible to invest in stocks with a small amount of money if you’re just
starting out. But know that it’s more complex than merely picking the right
investment and you must understand about the limitations which you face as a ‘newbie’
investor.
