WHY YOU DON’T NEED MUCH MONEY TO START INVESTING
You can invest small amounts of money surprisingly easily – and profitably. Small investors have more options that ever. Small investors are welcome in employer sponsored retirement plans, highly rated mutual funds, stocks, and money market cash accounts, and it’s easy to get started. If you’ve put off investing because you thought you needed large chunks of cash to get started, stuck in low interest savings accounts, your wait is over.
RETIREMENT SAVINGS FIRST
One of the best places for a beginning investor is an employer sponsored pre-tax retirement plan (401k or 403b in the U.S.). Your contributions can be as small as you like and deducted from your paycheck automatically. If you can get into one of these plans, sign up as soon as you’re eligible, especially if your employer offers dollar matching. Don’t leave that money on the table when it’s free for the asking.
If you’re just starting out, especially if you’re in a lower tax bracket, a Roth IRA is a great deal. Sign on for automatic $50 monthly investments and you can open a Roth IRA mutual fund account with as little as $50. Your Roth investments are made with after tax dollars, so you never pay taxes on the principal, but all of your future gains will be tax free.
In time, the compounded gains will far exceed the small amounts of money you contribute and will grow to surprisingly large sums. But no matter how much money you make in a Roth, you won’t owe the government a single dime in taxes – ever. It’s hard to pass on this kind of bargain, and even if you have a 401k, 403b or traditional IRA, you’re still eligible for a Roth IRA.
CASH RESERVE AND DEBT REDUCTION FOR SECURITY
Everyone should have an interest bearing, emergency cash reserve account. Open one as soon as you are able, but not until you pay off high interest credit cards or consumer loans that are draining you dry month after month. Not paying 14 percent (and higher) interest rates is far more important than receiving 4 or 5 percent interest on your savings. Imagine for a minute, having all that money invested and working for you instead of lining someone else’s pockets with astronomical interest rates.
OPPORTUNITIES – INVEST SMALL AMOUNTS FOR BIG RETURNS
Once you’ve put your high interest debt behind you and have three months living expenses socked away in your cash reserve account, you will undoubtedly want to put your money to work for higher returns. Sharebuilder is tailor made for the small investor who has limited funds to invest.
Sharebuilder is an online broker with a twist. Anyone can sign up for an account with no minimum and no inactivity fees. There are no minimums for investments and the commission is only $4 per trade. Unlike traditional brokers, you don’t have to buy stock shares in blocks or whole shares. Transactions for each individual stock are entered as dollar amounts so you normally end up with fractional shares because Sharebuilder pools individual small trades to save costs, perfect for the small investor with limited resources.
Sharebuilder offers over 6,000 individual stocks and ETFs (exchange traded funds), so you choose from a wide range of investments. You aren’t restricted to the pooled trades either. You can make real time trades at $15.95 per market order. Sharebuilder is ideal for small investors.
REGULAR INVESTING BUILDS TRUE WEALTH
The secret to building true wealth is regular, systematic investing and time. Overnight riches are a fool’s dream. You don’t need large sums to invest. With discipline and consistency, and the many tools available, you can invest small amounts of money and build true wealth.
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Sources:
http://www.sharebuilder.com/
http://www.guidedchoice.com/pretaxplans.html
http://www.kiplinger.com/columns/starting/archive/2005/st0310.htm