Investing doesn’t require a lot of money. But while it is possible to start with just a few hundred dollars, according to Hazelle Soon, co-founder of The Joyful Investors, it may not be convenient for those who have just recently started work.
Founded six years ago, the company specializes in expanding personal investment portfolios. Hazelle and her team have worked in wealth management and financial markets trading, and offer a proprietary Moneyball investment method (check out her YouTube video here to see how it works).
Here she advises on some strategies, depending on what you have available.
$ 2,000: Go slow
If you’re an inexperienced investor and want to slowly and comfortably build investment skills, consider broad-based exchange traded funds (ETFs). An ETF is a mutual fund that comprises a basket of securities that are traded on an exchange. In the US market, for example, we have the DIA ETF, which tracks the Dow Jones Index, and the SPY ETF, which tracks the S&P 500 Index.
At $ 2,000, investing in individual stocks may not be ideal as your hands are pretty tied. One factor that you need to consider is the lot size of the stocks in the different markets.
For example, a lot size at SGX is 100 shares; A lot size on the US stock exchanges is equal to one share, and a lot size on the Hong Kong stock exchange varies from 50, 100, and even 1,000 shares. Therefore, you may not be able to buy stocks of certain companies with an initial capital of $ 2,000.
In addition, you cannot strategically plan the portfolio construction. This is because it may not be cost effective to execute multiple transactions for just $ 2,000 in capital. Here’s an illustration: if you plan to build your portfolio with five stocks, the total commission fee of $ 20, with an initial cost of $ 400, is already 5 percent! This will eat up your winnings!
$ 5,000: Do your homework
Start Investing If You Didn’t! In addition to ETFs, consider stock picking as well. Although you are still limited by capital size, you can improve your stock selection skills.
This will better prepare you to invest in the future with more capital. There is nothing wrong with sticking to ETFs any longer, however, as the stocks you are going to buy may be too focused on specific sectors if we look at just two or three stocks.
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$ 10,000: Balance your portfolio
It’s time to act! This is a good amount to work with as it is enough for four to five holdings of stocks. There are no opportunity costs by leaving this money in your savings account unused! If you have no investment experience, it would be good to kickstart your investment by sticking to an initial capital of between $ 10,000 and $ 20,000.
Make an effort to sharpen your investment skills and build your financial literacy before attempting to manage any major investment capital. Understand your risk profile during this time and master a suitable set of investment strategies.
This article was first published in Her World Online.
