You don’t need to be independently wealthy in order to invest. Here are some ideas for investing small amounts of money that could pay off nicely over time.
It’s easy to get the impression that investors are already wealthy. They put thousands or tens of thousands of dollars into startups, IPOs, and hot new stocks that make them more and more money. The fact is, you don’t need very much money to start investing. All you need are some good ideas for investing small amounts of money, and a little patience. If you want proof, just look to the fable of the stone soup.
If you don’t recall the story, it begins with a hungry traveller arriving in a village. The traveller starts a fire and puts a pot of water on, using only a stone for “flavoring.” Gradually, curious villagers inquire about this stone soup, which the traveller raves about. The traveller offers to share, but really could use a few things to improve the flavor. Villager by villager, they add carrots, potatoes, and seasonings. Finally, the stone soup is ready, and everyone enjoys the meal.
Among the many lessons of this story, one is that a little bit here and there adds up to a delicious stew. This concept is the key behind successful ideas for investing small amounts of money to eventually grow your portfolio. You start out with a small investment, maybe only $25, and gradually add to it.
Winning ideas for investing small amounts of money into profitable stocks
Before we get into ideas for investing small amounts of money in the stock market, let’s talk about some things you want to stay away from. First, and perhaps most importantly, is that you don’t want to mistake cheap stocks for low-priced stocks. Cheap stocks will take your money and run. Low-priced stocks, or value stocks, are worth more than their current share price.
This might mean that you have to wait and save your money for a little bit before you start investing. That’s always a better option than dumping your hard-earned money into a company that’s about to shutter its doors.
The other thing you want to avoid is getting into the habit of continually buying and selling stocks. Most investors lack patience. That’s a shame, because almost every successful investor we’ve ever met or read about has an abundance of patience. After all, if you’re correct on a stock, what’s the point of rushing things?
The way you make money in the stock market is by holding stocks, not buying or selling them. Sounds obvious, doesn’t it? That’s just the how the stock market works. The value of your portfolio rises when a stock you own rises. So you have to be holding on to a stock if you’re going to take advantage of its appreciation.
But onto the reason you’re here: ideas for investing small amounts of money that will turn a profit. One of the best things you can do is buy stocks of famous companies. Big, famous companies’ stocks are generally less volatile than small companies’ stocks. That might mean you start out with one or two shares of one company in your portfolio. But you have to start somewhere.
Bear in mind that you need to diversify, as well. You can create a portfolio of 10 stocks even if you only have $2,000 or $3,000 to invest. And even if your ideas for investing small amounts of money fall well under that amount, work towards building up to that. Start with one stock of a famous company, then make it two famous companies.
No matter how much or how little you have to invest, always work to learn more. This rule applies to every aspect of our lives, but especially to investing, where every day brings new developments. Reading Cabot Wealth Daily is a great first step.
And one final suggestion. If you’re looking for advice on the best stocks to buy, consider our entry-level investment advisory, Cabot Stock of the Week, or one of our other advisories. After all, the best way to learn how to start investing is to do just that—start investing.
How do you approach investing when you only have limited funds to work with? We’d love to read your ideas in the comments.