How To Make Money In The Stock Market With A Small Amount Of Money

Investing can be more beneficial when large amount of money is in place, however that doesn’t mean investors with a little amount of money can’t participate in the stock market. This is made possible by some new online services and flexible investment accounts. Therefore, it is possible to have a small amount of money and invest in the stock market and at the same time make some extra cool cash.

In this article, Investing Port will be sharing with you some ways to participate in the stock market if you have a small amount of money.

·      Invest in mutual funds and ETFs that have a low investment minimum

Mutual funds are professionally managed investment funds that pull money from many investors (retail or institutional) to purchase securities. Mutual funds are beneficial as they promote diversification, safe investing and liquidity. Different mutual funds and ETFs have different initial investment minimums. Many require that investors have several thousand dollars to open an account, but there are some that allow you to start an account with far less. You can find these funds by doing a simple search online or by searching on whatever investing platforms you use. Also, it allows low investments as low as $200.

·      Reinvesting dividends and Dividend Reinvesting Plans (DRIPs)

      For a person with not much money, you can invest in a stock that pays dividends so that your money can work for you with the use of dividend reinvestment.  Dividend reinvestment simply means using the cash that a company distributes as dividends to automatically purchase more shares of that company's stock. Each time a dividend is paid, you then use the money to buy more shares. 

      Assume you own 10 shares of a stock trading at $5 per share, before it pays out a $1 per share dividend. You then make a decision to reinvest the dividends, the $10 total dividend payment (that is $1 per share multiplied by 10 shares) would automatically purchase or reinvest in more shares so that you would now own 12 shares after distribution.  However, if you decide not to go with the option of reinvestment, you would be left with the same 10 shares you started out with as well as an extra $10 of cash in your portfolio.

DRIPs are plans that allow you to invest small amounts of money into stocks of companies that pay dividends. Many large companies offer DRIPS, so if you want to invest directly in stocks, and you like certain companies, you can invest in those companies, usually without having to pay any kind of investment fees. DRIPS typically allow you to build your investment over time by making periodic contributions.

·      Invest via platforms that charge little or no transaction fees for stock investment

There are a number of online investment platforms that offer professional management of your investment with very low or no fees. Some of these platforms include Robinhood, TD Ameritrade, Schwabs, Cash App and so on. It starts by completing an online questionnaire that enables the site to determine what your risk tolerance level is. As a small money player, this saves you money from wasting money on fees, as a result, you can put all of your money into the stocks that you love.

·      Participate in Lending Club

Lending Club is an online peer-to-peer (P2P) lending platform in which borrowers come to get loans, while investors (lenders) provide the cash for those loans. In exchange, investors are rewarded handsomely for their investment. Although this is for big-money investors, they have some ways to allow small money investors to come in also. 

·      Investing in stocks that pay dividends

Some companies pay investors dividends for investing in their stocks while others don't. It is advisable that you invest in dividend-paying stocks if you have only a small amount of money to invest.

·      Invest in S&P 500 Index related investment funds

Warren Buffets has always advised Do It Yourself investors to invest in S&P 500 related investment funds because it is a sure way of not losing money of which Investing Port agrees. There are many mutual funds that invest in the S&P 500 stocks. Over time they have proven reliable with manageable risk. 

     If you have a small amount of money to invest and you apply any of these techniques, be       rest assured that you can make some extra cash.  

Conclusion: Investing can be very risky, actually, not many people can beat the market consistently and a lot actually lose money. As a small money player, mutual funds are the way to go, they do not fluctuate a lot because of the diversification.  Diversification of stocks is an investing style used to reduce risk by taking investment position among various financial instruments, industries, and other sectors.