One of the most amazing things the internet has brought investors is the ability for everyone to participate in the financial markets.
Once only the practice of the wealthy and Wall Street insiders, access to the engines of capital creation have become democratized for everyone.
No longer does one need vast sums of capital, connections, or secretive knowledge to capture profits from the markets.
In fact, even those with as little as $100.00 can put that money to work in ways that were once unimaginable.
This article will explain my five favorite ways to invest in a small account.
1. Employer Investment Plan
If you are employed and your employer offers an investment plan, take advantage of it! Many employers provide matching funds to employees who participate in their investment programs. Matching funds, no matter what percentage is matched, is an incredibly powerful way to ramp up your personal assets. It’s like a guaranteed instant return regardless of what the market does. Some employers even match their employee contributions 100% which is a fantastic benefit.
Even if your employer does not offer a matching benefit, max out your contributions to the investment plan. It is an easy way to passively invest via professional management and hopefully capture market like returns over time.
Of course, this option is only open to those who are employed, and their employer offers such programs. Those who are self-employed retired, or not employed by a company providing investment plans need to become self-directed investors. When I say self-directed, I am not necessarily referring to choosing individual investments. I am talking about deciding where to put your money. That leads us to the second way to invest in a small account.
2. Robo-Advisors
Big data, the internet, and automatic investing have opened up the world of robo-advisors to everyday investors. Professional traders and institutions have had access to automatic investing for decades. It has only recently become available to every investor.
One of the best things about robot-advisors is that you can open an account with no capital and there is generally no minimum deposit. Once your account is open, it can be seamlessly linked to your bank account for automatic deposits of whatever amount chosen.
The largest robo-advisor is Betterment.com. Betterment boasts an AUM of over $10 billion, making it the giant in the field. It offers accounts like IRAs, trust accounts and 401(k) options.
Betterment’s investment mix includes a portfolio of stock and bond index funds. It chooses your combination based on a risk questionnaire, so an ideal personal portfolio can be designed.
One of my favorite things about Betterment is that it offers different tiers of service. While anyone with any amount of investible can open an account and start with the essential functions, as your account size grows premium plans are available. It takes $100,000 to access Betterment’s premium services.
Another popular robo-advisors is Wealthfront. Wealthfront has a $500.00 minimum investment to open an account.
3. NADEX.com
The North American Derivative Exchange, or NADEX, is an excellent place for active investors with modest capital to trade the financial markets.
Unlike traditional brokerage accounts that are subject to the $25,000 pattern day trading rule, investors can actively day trade with modest amounts using NADEX binary options and spread products. In fact, one can start to trade on the NADEX exchange with as little as $100.00.
NADEX offers different time frames for their investing products of up to a week in duration.
Make no mistake, there is high risk involved day trading derivatives. However, if you want to get involved in short-term investing but have limited funds, NADEX is the solution.
4. Long-Term Dollar Cost Averaging
Not everyone is cut out for short-term active investing in an exchange like NADEX. If active investing is not your cup of tea, you can still participate in the stock market. Many online brokers have very low minimums of $2500 and less to open an account. While you can not day trade due to the pattern day trader rule, small accounts can invest for the long term at most online brokers.
Purchasing a small number of shares on a regular basis takes advantage of dollar cost averaging. Starting a portfolio based on the dollar cost averaging strategy can be done with a brokers minimum account size. Using this tactic combined with a long-term perspective is a powerful way to start your investing journey no matter what your account size.
5. E-mini Futures
If you do not have enough to qualify for a day trading account, futures brokers, such as AMP Global, will allow you to trade index futures with as little as $500.00 margin per contract.
One can day trade the Nasdaq, the S&P 500 and the Dow Jones Industrial Average via the E-mini futures. If you like speculating on the direction of the overall stock market and just have a few dollars to risk, E-mini futures make sense.
Starting with just $1000 in your account, you can risk $500.00 in the futures market with a chance of earning handsome returns.
Risks To Consider: Futures and options are exceedingly risky. Only use money that you can afford to lose when investing in these volatile instruments. Remember, with high risk comes high reward.
Action To Take: If you are wanting to get involved in the financial markets but don’t have much risk capital, try one or more of the above methods! The knowledge gained by investing with real money on the line is always superior to simulated funds once you master the trading platform.
— David Goodboy
This Michigan couple collects a $40,000 “bonus” every year [sponsor]
Vernie and her husband were hard-working farmers all their lives. But they finally retired. And unlike their friends, who have to supplement their meager Social Security checks with part-time jobs just to make ends meet, Vernie says they’re collecting about $40,000 a year in extra income. “We bought a new car last year and could pay for it.” Does that sound like a retirement you’d be looking forward to? If so, click here to learn their secret.
Source: Street Authority