By Victor Ochieng
There are moments when you may feel like investing money, but then something tells you that you don’t have enough. It might be that end of the year $100 or $500 holiday bonus that leaves you wondering whether to invest, or simply drop it in your holiday expenditure.
Due to a lack of investment information, many end up spending such monies, believing that there isn’t a way to invest small amounts.
However, according to Stephanie Genkin, a Financial Planner and Instructor at New York University School of Professional Studies, one can invest even as little as $100 in the stock market. And he explains that such a small amount is a good way to try out the market, especially for someone investing for the first time.
“It can be worth investing small to test the waters and see how you react as an investor,” Genkin tells Madame Noire. “Investors are happy when stocks prices go up. What about when the value of your investments decline? Investing small could help you understand what it feels like and how you will react, without inflicting a lot of damage. But you still have to do your homework.”
When one invests, it provides a form of saving that will protect them against inflation. Even when the value of currency goes down, one’s investment still maintains a stable value.
“One should invest so that savings will outpace inflation. Your dollars left in a savings account for a long-term goal like retirement is guaranteed to lose purchasing power. For most people, investing in stocks and bonds is the best way to ensure that you don’t outlive your money,” Genkin said to one of her clients. “Most of us will not earn enough at our jobs to produce the kind of savings we need.”
Investing small amounts of money is best done through low fee financial managers whose investments are diversified. Such diversification ensures you earn something even when some sectors aren’t doing so well.
“I don’t recommend investing in individual stocks. It’s like gambling. You want to buy shares in a low-cost fund. Buying a few shares of a financial sector index fund, for instance, could let you stick a toe in the water and for $100, you’d own four shares of a fund that invests in top U.S. banks and is up more than 14 percent this year,” explains Genkin.
Investment managers set minimum amounts that people can invest. It’s important to find an investment manager whose minimum is manageable for you.
It is important to consider chargeable fees, nature of investments, and the minimum amount that one can invest.