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Start Investing with only $1000

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Here is the scenario: you want to open an account or explore the world of investing in the stock market, but you only have a meager $1000 in your savings. Do not despair because it is quite possible to start investing with that amount alone. But before jumpstarting your stock and bonds journey, there are several things that need to be considered. For one thing, there might be constraints such as minimum deposit restrictions and commissions that need to be paid. But it can surely be done, and to get started on your journey as an investor, here are some tips and tricks you could follow in order to maximize your returns.

Minimum Account Requirements:

Investing in stocks may seem like a piece of cake at first especially if one doesn’t have ample experience in that area. However, it’s not quite as simple as that, bearing in mind that there is a minimum deposit requirement for all financial institutions. That means, unless you meet their requirement of depositing a certain amount of money, they won’t accept your application. And a sum of $1,000 may well be below the minimum requirement scheme of many banks and brokerage firms. Now, here are some ideas where you can invest your money in:

Stocks:

There are two types of stockbrokers – full-service and discount. A full-service stockbroker provides more service than the latter and more often, deals with high-profile accounts, that is, clients with a high net-worth; in fact, they usually deal with people whose accounts start with a minimum of $25,000 or more. On the other hand, a discount stockbroker will be most suitable for anyone investing in a small budget since they have lower fees. Aside from consulting with a stockbroker, one may also directly purchase shares from a company with the help of direct stock purchase plans. Online trading is simpler too, as there are numerous discount brokers with little or no minimum deposit requirements but be sure to check other restrictions and hidden fees thoroughly.

Bonds & Mutual Funds:

Now if you are more interested in bonds or mutual fund investments, then you and your $1000 may fare better in this direction as these are much simpler because of the flexible minimum deposit amounts. Both can be purchased via brokerage firms, and mutual funds can be bought from your local bank for as low as $1,000 – even lower if one has an existing relationship with their bank. Government bonds can be purchased directly from government websites, though the only restriction to bear in mind is the minimum amount of the purchased bond which usually costs $100 for most programs.

Cost of Commissions:

Every time you purchase a stock, bond, or mutual fund, you will have to pay a commission and this may be a problem given your limited money. If you constantly trade (buying or selling) in stocks, you will be charged with a trading fee which can range from $5 to $10 for every transaction – if you purchase five stocks all at the same time, then you will still be charged separately for all trades bought. In terms of mutual funds, you will have to pay fees as well such as the MER (or the management expense ratio) which is charged annually by the management team based on the number of assets in the fund. Simply put, the higher the MER, the higher the fee. The cost and the minimum account requirements may be a pain in the head but one must simply be wise in terms of decision-making especially in choosing which area to invest in.

Diversification:

The best way to avoid risks is to diversify your investments. In short, by investing in a variety of assets, you’re reducing the risks and dangers of facing financial losses from your overall investments. This may come in handy considering stocks fluctuate from time to time. If such thing happens, one will still have their mutual funds or bonds intact; though with a small budget, this could be slightly difficult.

Nevertheless, we suggest doing one’s homework well first and weighing their options carefully before investing. There are numerous options to consider and though you may find obstacles in your way, there’s always a way around them. You and your $1000 can go a long way if you choose wisely.

The writer isn’t a professional financial advisor, readers should consult with a financial advisor before investing money and know the risks involved in investing.

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